November 29, 2008
That Was The Week That Was … In Australia
By Our Man in Oz >>
www.minesite.com
Minews. Good morning Australia. It looks like your market staged a strong recovery over the past week.
Oz. It does, though it depends on where you started counting. If restricted to last week only, then it was the boom returned with the key metals and mining index up an eye-catching 25.5 per cent. If looked at over the whole of November, it was simply a case of recovering lost ground, as prices effectively moved back to where they were at the end of October. If you continue that theme of one event cancelling out the other, it was the same at a corporate level with a very strong rise from BHP Billiton (BHP) on the index counteracting the heavy fall of Rio Tinto (RIO).
Minews. Well, if the numbers don’t provide a clear picture, then what was the mood like?
Oz. Better, but once again you would have to say that the flow of news was evenly balanced, with the negatives almost cancelling out the positives. The negative situations at OZ Minerals (OZL) and CopperCo (CUO) took a lot of people by surprise. OZ was in a trading halt on Friday night as it renegotiated some of its debt facilities. That sort of renegotiation tends to frighten the horses at times when debt is hard to find. CopperCo looks somewhat worse, as administrators were called in after it failed to finalise a new debt and equity package.
Minews. Okay then, let’s start this week’s review in a different way, by looking first at the corporate situations before covering the sectors.
Oz. Good idea, because it’s the deals which provided much of the week’s news. The obvious starting point is debt, and the collapse of the proposed BHP Billiton merger with Rio Tinto. One key cause for the collapse of that deal, though there were others, was Rio’s high debt levels. The market was also relieved that BHP Billiton’s proposed new US$55 billion debt was now off the table. And you don’t have to be Einstein to see that debt also lies at the bottom of the troubles at CopperCo and OZ. In the case of CopperCo the company was killed when a “financing transaction”, as documents have it, collapsed. OZ, meanwhile, is also in the process of re-arranging debt facilities after a major shuffle of project development schedules and cost-cutting. It expects to resume trading on the ASX on Tuesday. Before requesting the suspension, OZ had fallen A4.5 cents to A55 cents. CopperCo’s last trade was at A5 cents.
The nasty bit of these re-financing and debt troubles is that even the biggest miners in the world are not immune, and that includes Rio Tinto itself. BHP Billiton’s decision to walk away from a deal it has spent years hatching tells us three things. BHP Billiton does appear to be genuinely concerned about Rio Tinto’s US$42 billion debt, acquired when it bought Alcan. It is also likely that the concern stretches as far as BHP Billiton itself, worried about the chances of re-financing such an enormous dollop of money at a time when debt markets are closed. The third message is that BHP Billiton has sidelined itself, but only until next year, when it might re-bid for Rio Tinto at a substantially lower price, or buy some of its assets should forced sales become necessary.
Minews. An interesting scenario. Time now for prices, please.
Oz. This is the good bit, but remember we’re looking at one week’s recovery and while the earlybirds sometimes get the worm, they can also move too soon. Let’s have a look at other deals because there was some good news to be had there too. OM Holdings, a low-key manganese miner, appears to be in the takeover cross-hairs of Ukrainian-controlled Consolidated Minerals which snapped up an 11 per cent stake in the company during the week. That move drove OM shares up by 62.5 per cent to A$1.30. Meanwhile, Moly Mines (MOL) reported that it is looking for possible joint venture partners for its Spinifex Ridge molybdenum project, an announcement which helped lift the stock by 29.5 per cent to A28.5 cents.
And as we switch now to the sectors, it’s worth noting that this was a week when finding any stock which fell was a hard job, and that makes a pleasant change from playing spot the riser which we’ve been doing a lot of over the past few months. Among the gold, uranium and iron ore sectors it was all up. Most of the coal stocks also rose, while the base metals did not do as well.
Minews. Let’s start with gold.
Oz. Biggest mover was a stock we haven’t heard much from for a long time, Tanami Gold (TAM). After a long struggle Tanami seems to have got its operations and financial matters back into good order, a process which has included a fresh capital raising. The company’s shares rose a seemingly tiny A1.5 cents during the week, but when you’re coming up from a A0.7 cents Friday’s closing price of A2.2 cents represents a stellar gain of 214 per cent. Another gold company on the rise was Adamus (ADU), up by 76 per cent to A22 cents, though it is worth noting that the low price of the previous week was on very thin turnover. And other gold movers included Perseus (PRU), up by 20 per cent to A30 cents, Allied Gold (ALD) up by 25.6 per cent to A27 cents, Troy (TRY), up by 17 per cent to A82 cents, Centamin (CNT), up by 17 per cent to A82 cents, and Kingsgate (KCN), up by 12.6 per cent to A$2.67.
Minews. Iron ore next.
Oz. All up, as mentioned earlier. Atlas (AGO) regained a bit of lost ground with a rise of 42.2 per cent to A64 cents. Northern Iron (NFE), another emerging producer, and one which we took a look at mid-week, was up by 25.4 per cent to A69 cents. Mt Gibson (MGX) shook off some of its recent heavy losses to rise 46 per cent to A30 cents. Meanwhile, Territory (TTY) also made a modest comeback after a sharp fall during November. It closed at A11 cents, up 37.5 per cent. FerrAus (FRS) was another strong riser, 33 per cent to the good, and finally Gindalbie (GBG) rose 18.8 per cent to A41 cents.
Base metal stocks put in a mixed performance, as we said, but it was notable that there were few reasonable recovery stories among the zinc producers. Perilya (PEM) ended a long losing streak with a rise of 33 per cent to A14 cents. CBH (CBH) rose by 30 per cent to A3.9 cents,, and Kagara (KZL) rose 29 per cent to A44 cents.
Copper stocks were more muted, perhaps because of CopperCo’s demise and the debt issues at OZ. Marengo (MGO) was the star, though rising off a low base. It rose 50.6 per cent to A11 cents. Also moving up, Anvil (AVM) rose 11.7 per cent to A95 cents, and Equinox (EQN) rose 12 per cent to A$1.68. Among the fallers, Citadel (CGG) dropped half a cent to A12.5 cents.
Nickel stocks trended up, some better than others. Independence (IGO) rose by 20 per cent to A$1.48, Western Areas (WSA) rose 27 per cent to A$3.50, and Mincor (MCR) was steady at A52 cents. On the downside, Albidon (ALB) slipped A1 cent lower to A24 cents, although the company does seem successfully to be addressing market concerns about the working capital issues at the Munali nickel mine in Zambia. On thing the market liked was that its Chinese off-take partner was sticking by it.
Minews. Let’s finish with uranium and coal.
Oz. It was hard to find a uranium stock that lost ground last week. Bannerman (BMN) continued to star thanks to its new management team and its fresh capital. The company rose 19.5 per cent to A58 cents. Wild Horse (WHE) delivered a terrific return for some lucky punter, rising by 111 per cent to A9.5 cents, while Uranex (UNX) rose 17 per cent to A17 cents.
Most coal stocks rose. Riversdale (RIV) rose a very strong 34.7 per cent to A$2.56 as it strengthened ties with the Talbot Group, the private company behind Macarthur Coal (MCC). Macarthur itself performed slightly less strongly, rising 9.4 per cent to A$3.71. Coal of Africa (CZA) shook off its losing streak with a strong 46.5 per cent rise to A$1.26. But losing ground, Felix (FLX) and Centennial (CEY) fell by 15.4 per cent and four per cent respectively, to A$5.50 and A$2.61.
Minews. Thanks Oz.