FLX - Felix Resources

[noirua]

Felix Resources are the only coal stock I've kept as I'm now no longer confident about the sector for the rest of the year. Felix are a bit of a gamble on Yanzhou getting regulatory Aussie approval for the bid to go ahead. However, if that bridge is crossed a better bid should emerge as others will see, in depressed coal markets, an opportunity in getting Felix's PCI, semi-soft coke and low cost Moolarben mines quite cheaply.

 

[Quillan]

I am not sure what you are getting at, Noirua? Surely whether clearance is given or not for Yanzhou's bid, it will not affect the position of a counter bidder?
Perhaps if it is not cleared, any other bidder may feel he does not have to bid as high as he might have done, if Yanzhou was still in the picture.
Have I misunderstood something?

 

[noirua]

I am not sure what you are getting at, Noirua? Surely whether clearance is given or not for Yanzhou's bid, it will not affect the position of a counter bidder?
Perhaps if it is not cleared, any other bidder may feel he does not have to bid as high as he might have done, if Yanzhou was still in the picture.
Have I misunderstood something?

Hi Quillan, If Yanzhou's bid is not approved then bids by Vale and Shenua would likewise have to be refused on similar grounds. The Anglo Swiss Xstrata, the American Peabody and Noble could hardly be deemed exceptable if Yanzhou are not.

I could not see BHP Billiton or Rio Tinto wanting to get involved after the above.
So I think Yanzhou's bid will have to be accepted by the Aussie Authorities as not doing so looks to be quite complicated.

 

[noirua]

Where do we stand now on the Yanzhou bid? Well, there is the pull downwards of the thermal coal price that has plummeted over US$10 per tonne in the last month and the balance to this is interest in coalmines in Australia, by India and China. Particularly India this week with about $1.5 billion laid down for stakes in mines in Queensland and NSW.

Interesting it would be to see if Felix Resources and Yanzhou Coal have a plan "B" if the bid situation falls apart. Stakes to be taken in Moolarben, Ashton and Yarrabee along with coal purchase deals.
A 29% stake in Moolarben, 9% in Ashton and 49% of Yarrabee could net Felix Resources about $450 - $550 million and allow a cash payout of around $2.00 to $2.50 a share in dividends and cash returns. That would give the Felix directors a cash payout without selling stock.
Yanzhou could also buy AMCI's stake of 19.2% of Felix at around $18 a share.

Thus all would be happy and probably the Authorities Federal and local NSW.

 

[noirua]

A 29% stake in Moolarben, 9% in Ashton and 49% of Yarrabee could net Felix Resources about $450 - $550 million and allow a cash payout of around $2.00 to $2.50 a share in dividends and cash returns.

Forgot to add that Yanzhou, in this guessed at situation, would also be required to pay about $160 million in forthcoming and past development costs on the mines. Figure on above mine valuation $450 - $550 million is probably a bit on the low side and may be nearer $700 million, who knows however in these dodgy market situations.

 

[noirua]

All quiet on the Western Front as Felix shareholders and PERHAPS potential bidders await a decision, one way or the other, on the bid by Yanzhou Coal Company.
Closing price of FLX stock was $17.47 against a bid price, including the 50c final dividend, of $18.50. Price still shows nothing for any counter-bid and a little negative on Septembers' decision on the bid go-ahead.

 

[Quillan]

Hi Quillan, If Yanzhou's bid is not approved then bids by Vale and Shenua would likewise have to be refused on similar grounds. The Anglo Swiss Xstrata, the American Peabody and Noble could hardly be deemed exceptable if Yanzhou are not.

I could not see BHP Billiton or Rio Tinto wanting to get involved after the above.
So I think Yanzhou's bid will have to be accepted by the Aussie Authorities as not doing so looks to be quite complicated.

Hi Noirua, Thanks for your explanation, Silly me! It didn't occur that if Yanzhou was turned down it might prejudice other foreign bids. I was only thinking of OZ bids.
Have you slipped up on your latest post when you quote the figure of $18.50?
Surely the bid, including the October Dividend of 50 cents, totals $17.95, Have you conjured up another 50 cents for us?
If so, another Tinnie !!
Add the 5 cent cash value of the SA spin off, which I assume is valuing The SA propeties at the $10m cash injection, or say 5 cents a share.
Would you hazard a guess of $100m on SA, just for the coal deposit? There's a reason the Directors wanted to hang on to it. After all, they own half of it approx.?

 

[noirua]

Hi Noirua, Thanks for your explanation, Silly me! It didn't occur that if Yanzhou was turned down it might prejudice other foreign bids. I was only thinking of OZ bids.
Have you slipped up on your latest post when you quote the figure of $18.50?
Surely the bid, including the October Dividend of 50 cents, totals $17.95, Have you conjured up another 50 cents for us?
If so, another Tinnie !!
Add the 5 cent cash value of the SA spin off, which I assume is valuing The SA propeties at the $10m cash injection, or say 5 cents a share.
Would you hazard a guess of $100m on SA, just for the coal deposit? There's a reason the Directors wanted to hang on to it. After all, they own half of it approx.?

Hi Quillan, I've tried many things in life but conjuring is not one of them.
The bid by Yanzhou includes two 50c dividends due in October (will only be paid on FIRB approval with the declared ***final dividend of 50c) and December, $16.95 cash due in December plus SACCS - totals $18.00.

There is in addition a ***final dividend of 50c, so Felix stock is cum dividend (at the moment) before going xd on the 9th October (on the books 15th October). Therefore $18 plus the final dividend of 50c = $18.50.

To clarify further, the ***first dividend of 50c (under the bid by Yanzhou - part of the $18 offer), will only be paid if Yanzhou get approval from their shareholders and from the Australian Foreign Investment Board.

The Yanzhou bid is really worth different amounts depending where in the world people reside or the residency choice made.
Australians are not liable to tax on the fully franked dividends, so they are worth the full amount. Most other countries do not accept the franking situation on dividends, therefore UK residents for instance are liable to 20% tax or 32.5% tax on the dividend after the franking at 30% is deducted.
Also capital gains tax varies in most countries, there being no capital gains tax in some, NZ and British Channel Islands etc.

This bid is therefore OK for some and not so good for others.

 

[noirua]

Thoughts are that Felix Resources and Xstrata are in a more co-operative position after agreeing water rights, shared use, and use over the Moolarben Project and the Ulan Longwall mine.
If rumours are proved correct that they are no longer interested in bidding for Lonmin then Felix Resources would be a better objective.
Felix directors are tied to the Yanzhou bid and forfeit $34 million if another superior bid is accepted.

Xstrata, the Anglo Swiss diversified miner, may consider a quote in Australia to allow a cash and stock alternative. Now thought to be favourites to counter-bid.

Xstrata's (90% owned) Ulan mine adjoins Felix's (80% owned) Moolarben project. Felix Resources Ashton mines (60% owned) in the Hunter are close to four of Xstrata's mines (Glendell, Narama, Ravenswork and Newpac).

Xstrata have made no comment on any interest recently in Felix Resources.

 

[noirua]

Yanzhou Coal Company (Controlled by the Chinese Government) had become concerned that their bid for Felix Resources was meeting resistance. They have therefore re-entered their application by changing the buyer from Yancoal Australia Ltd., to their Australian subsidiary Austar Coal mine, a company purchased in 2004. Financing will be through the Sydney Branch of Bank of China (BOC).

 

[noirua]

The date for approval by the Australian Authorities for the bid by Yanzhou coal has been pushed out to 10th October and is now set to put a squeeze on the original timetable, set for the end of September.

 

[noirua]

BHP Billiton are earmarking about US$10 billion of their US$18 billion surplus on existing projects and new acquisitions. The company has earmarked 5 opportunities: http://www.reuters.com/article/innovationNews/idUSTRE58I09S20090919

 

[noirua]

The date for approval by the Australian Authorities for the bid by Yanzhou coal has been pushed out to 10th October and is now set to put a squeeze on the original timetable, set for the end of September.

The 30 day assessment period is in fact due to end on 11th October, having been pushed out by Yanzhou Coal having to resubmit their bid for Felix Resources by the regulatory authorities: http://www.zibb.com/article/5521854/Felix+bid+held+up+by+FIRB

 

[noirua]

About three weeks or so old now is this article on Felix Resources Chairman Mr Travers Duncan: http://www.equitiesmagazine.com/article_travers_duncan.php

 

[gfresh]

Talk over tougher FIRB criteria have led to Felix dropping significantly below the bid price today..

Might they request the bid from Yanzhou Coal to be scaled back to under 50% ?

http://www.businessspectator.com.au...more-knockbacks-pd20090925-W7LP3?OpenDocument

FIRB says China should expect more knockbacks

The Foreign Investment Review Board (FIRB) has given a rare insight into its decision making process, revealing that China should expect some future bids by its state-owned firms to be knocked back.

Patrick Colmer, one of the four directors of the FIRB, spoke at a China-Australia investment forum in Sydney on Thursday, as the regulator requested a bid by China Nonferrous Metal Mining for local miner Lynas Corporation Ltd to be cut to less than 50 per cent, and as the Defence Department objected to another deal on security grounds.

The FIRB's request adds to a growing list of objections to Chinese companies trying to get a greater foothold in Australian companies, particularly resources.

''In the resources industries … our government has expressed a preference for projects which are joint projects in various forms,'' Mr Colmer said, according to The Age.

''We are much more comfortable when we see investments which are below 50 per cent for greenfields [undeveloped] projects and around 15 per cent for major producers," he said.

Relations between the two countries have been strained recently, following the detention by the Chinese government of Rio Tinto Ltd executive Stern Hu and Australia's rejection of several other proposed Chinese investments earlier this year.

However, both the Chinese and Australian governments have endeavoured to play down the severity of any deterioration in the relationship.

According to The Age, Mr Colmer said in the past 18 months the FIRB had received 90 investment proposals worth $34 billion from China.

While most were approved without issue, Mr Colmer warned investors not to try to bypass the FIRB.

''We are happy to work with companies, so talk to us early, don't turn it into a legal stoush, and deal with us the way we like to deal with you, which is in confidence,'' Mr Colmer said.

 

[noirua]

Talk over tougher FIRB criteria have led to Felix dropping significantly below the bid price today..

Might they request the bid from Yanzhou Coal to be scaled back to under 50% ?

It does look as if this bid by Yanzhou (using Austar coal mine subsidiary) is treading water now.
The setup is: State owned Yankuang Group have a controlling share in publicly quoted Yanzhou Coal Company (quoted in Shanghai, Hong Kong and Wall Street). Yanzhou own private subsidiary Yancoal Australia. Yancoal Australia own subsidiary Austar Coal Mine.
Yanzhou Coal are now using Austar Coal Mine, instead of Yancoal Australia, to bid for Felix Resources.

There is also concern that Yancoal Australia will want to use the LTCC form of intensive longwall caving to mine the Moolarben Underground Mine - close to the Great Dripping Wall and Goulburn River and National Park.
The LTCC process requires using 20% more water and recovers more coal in larger seam widths. Plans by Yanzhou may be to increase the 4mtpa of coal mined by Felix Resources by up to 80%.
http://www.yancoalaustralia.com.au/company_profile.htm
http://www.austarcoalmine.com.au

 

[noirua]

The change of bidder to Austar Coal mine Pty was doubted in a "private message" to me. So the link to the information is provided below:
http://news.alibaba.com/article/det...00171365-1-coal-firm-alters-felix-buyout.html

 

[Quillan]

The FIRB wording of "some future bids" could be significant? It's a bit hard on Yanzhou to be told to resubmit its bid, which it has done, and then to be told later that we don't want you owning one of our precious resources.Hence why the word "future" maybe was used?
Of course we want it to be cleared and then for the white knight to come charging in.
If it isn't cleared, would that just leave BHP and Rio, or could Xstrata be in the frame, since they have a presence in Australia already, and the synergy of being neighbours could be influential?
Significant price recovery today, but could that be due to the announcement of Results?

 

[noirua]

The FIRB wording of "some future bids" could be significant? It's a bit hard on Yanzhou to be told to resubmit its bid, which it has done, and then to be told later that we don't want you owning one of our precious resources.Hence why the word "future" maybe was used?
Of course we want it to be cleared and then for the white knight to come charging in.
If it isn't cleared, would that just leave BHP and Rio, or could Xstrata be in the frame, since they have a presence in Australia already, and the synergy of being neighbours could be influential?
Significant price recovery today, but could that be due to the announcement of Results?

Odds are increasing now, in the view of some, that this bid will be allowed with a few handcuffs attached on the UCC technology and limits on high grade thermal and semi-soft coke exports to China.

Directors have only pledged 30% of the companies stock to Yanzhou Coal. So it's up to AMCI 19.12% and three other large holders with 15% to hold the line and ask for more.
Yanzhou may add an extra dollar to the bid if no one else shows interest.

Hopefully Xstrata and Mitsubishi, partners on the next door Ulan mine, can see that their synergy savings are worth about $600 million over the life of the Moolarben mine. Worth about $3.20 extra. Looking for a counter bid of $19.30 cash against the $16.95 cash bid by Yanzhou.

$24 a share is the highest analysts price for Felix and I'd be most unhappy if we end up much shy of that. That would be dividends of $1, SACCS 10c and $22.90 in cash.

 

[awg]

Just a small sidenote, when I rang Felix on 26th Aug to clarify the dividend matter, I was more than a little surprised to be put through to Brian Flannery.

Thinking about it now, and the questions he asked me, (about the nature of my interest, told him truthfully just a private investor), I suspect he may have been expecting a call from a potential investor with MUCH larger pockets than me!

He was most courteous nevertheless.