FLX - Felix Resources

[gfresh]

Not that my small holding really has any influence, but for the record I've also rejected the takeover. Even though it would be in my best interests short term, for the sake of the country I think such a large resource is being sold way too cheaply, for a bidder that *knows* they are getting things at a bargain price, which they will milk for all its worth in future years.

Felix seems to be a fairly well run company, it's a shame the directors seem to have "had enough" and have thrown in the towel it seems.

Although I was thinking - maybe in their position they can see forsee the future direction of the coal industry under our coal/"emission taxed" future here in Australia?

 

[Quillan]

Thanks Noirua, I am not worried about the plummeting dollar. If its price is halved, it still leaves a halved massive debt, but that should mean a much higher coal price in $ terms.

If I have read the Document right, the approval of the Scheme requires 50% of shareholders present at the meeting, voting, with Proxies etc, a total of 75% of the Issued Capital, in favour of the Scheme

Note the wording does not say, "if you vote against".but "if you do not vote in favour." All very subtle language couched to favour acceptance, and certainly not impartial.

Here's what Reuters UK was saying today about Richards Bay future coal prices as reported on Global Coal.

"The price of coal delivered to northwest Europe may climb to more than 100 a ton by the middle of next year, Schels wrote. That price rose 1.6% last week to 73.60 a ton, McCloskey data show. It has slid 38% over the past 12 months. India faces a coal shortage and state-owned Coal India Ltd. is seeking to buy overseas mines. China, the world’s most populous nation, uses and produces more coal than any other country."

That's a potential rise of 35.87% per tonne in the next 12 months. What would that do to Felix's share price next year? We will probably never know.

Does a 75% Share acceptance by Felix Holders then require a 90% acceptance of the Yanzhou bid, to become unconditional, as Noirua has suggested?

If the acceptances did not reach 90%,[Noirua's figure] then all those who did accept would be paid out, leaving those who had refused as minority shareholders in the still quoted Felix.This is a recipe for manipulation, and a squeeze on the recalcitrant minority. Slash the dividend, and up the "expenses", to lower the share price, then Yanzhou or its agents pick us off even more cheaply.

However, if someone acquires a stake of more than 20%, I gather the whole ball game changes. Perhaps Noirua is working on this !!

Leave the curtain rail Noirua, and give us the benefit of your thoughts, please. Of course, we realise this would not constitute Financial Advice, merely a Shareholder's opinion.

 

[noirua]

Hi Quillan et al, From what I can see from all this information we have. It looks as if Felix Resources directors are taking this bid situation through the courts, so as to give Austar Coal mine the right to take our shares. A form of compulsory purchase order, though that's not the legal term.

 

[noirua]

Not that my small holding really has any influence, but for the record I've also rejected the takeover. Even though it would be in my best interests short term, for the sake of the country I think such a large resource is being sold way too cheaply, for a bidder that *knows* they are getting things at a bargain price, which they will milk for all its worth in future years.

Felix seems to be a fairly well run company, it's a shame the directors seem to have "had enough" and have thrown in the towel it seems.

Although I was thinking - maybe in their position they can see forsee the future direction of the coal industry under our coal/"emission taxed" future here in Australia?

Looks as if what you are saying could well be right. It could also be, that health might be an issue and the AMCI banking factor. Looks as if Messrs Duncan, Flannery and Mende are determined to sell.

I have sent emails and information to likely bidders. The best answer I got back was from Xstrata, "Thank You", so much for that.

 

[zaz]

FIRB APPROVAL FOR BID

With approval out the way the coast is clear for alternate bids. If there is going to be any action it will occur over the next 4 weeks. Given the approval i'd handicap an alternate bid at 70%;
a) The Yanzhou FIRB conditions are crazy so a higher bidder might actually have a chance of winning. With better conditions Yanzhou was more likely to dig their heals in,
b) The deal is too cheap.

The directors got a free put (reserve price) on this business at a tough time. It doesn't look all that wise right now but if this is as compelling as we think it is then more bids will come. I think they deserve more credit than some of the recent posts.

 

[noirua]

FIRB APPROVAL FOR BID

With approval out the way the coast is clear for alternate bids. If there is going to be any action it will occur over the next 4 weeks. Given the approval i'd handicap an alternate bid at 70%;
a) The Yanzhou FIRB conditions are crazy so a higher bidder might actually have a chance of winning. With better conditions Yanzhou was more likely to dig their heals in,
b) The deal is too cheap.

The directors got a free put (reserve price) on this business at a tough time. It doesn't look all that wise right now but if this is as compelling as we think it is then more bids will come. I think they deserve more credit than some of the recent posts.

We'll just have to sit and wait a while longer. So far, it has been 26 years and 25 weeks for me and there is the serious capital gains tax factor to consider.

Worth of Felix may be more for Xstrata/Mitsubishi at their adjacent Ulan mine, though they have loads of coal already, as have nearby Peabody at their nearby Wilpinjong mine. BHP have lots of coal and are developing a 15mtpa mine in the Hunter.
Shenhua wont bid against a fellow Chinese government controlled company. Noble Group have other interests and are too small to take on much more.

Anglo could try a punt at Felix Resources as this would annoy Xstrata at their Ulan Mine. Anglo and Xstrata directors are very much at war.

India is also a possibility now and their are several companies and tie ups that could be interested.

Lend me $1 billion and I'll put the cat amongst the pigeons! I did see $24 mentioned through Bloomberg a while back and that level may remain as a roof offer now.

Sadly I feel the small investor has been trampled on by the Felix Resources acceptance of a floor bid for the company. Mr Brian Flannery stands to pocket $520 million out of this and retains other interests in the company.

I remain very dejected by events so far.

 

[noirua]

Felix Resources stock managed $17.41 (636,000 shares traded in first 30 minutes) this morning against a Yanzhou bid of $16.95 and Felix Resources extra dividend of 50c worth $17.45.
This does show markets expect just a bit extra from this bid what ever happens - points to about $18 against $17.45. Some hope it seems after all.

 

[Quillan]

Felix Resources stock managed $17.41 (636,000 shares traded in first 30 minutes) this morning against a Yanzhou bid of $16.95 and Felix Resources extra dividend of 50c worth $17.45.
This does show markets expect just a bit extra from this bid what ever happens - points to about $18 against $17.45. Some hope it seems after all.

I can't agree with your assessment Noirua. Those buying in the market this morning at around $17.40 have very little to lose with a floor at $17.45. I would say they are punting on any bid from anyone to put the cat amongst the pigeons. It's just a punt, with no expectation of anything.
If the market believed a serious counter offer was likely, the shares would be at a premium on the Yanzhou total value of $17.45, in my opinion.

 

[Quillan]

More thoughts on Monday's dealings. MarketWatch says 1.5 million shares changed hands. That's a lot of small punters buying? Maybe not.
It was in volumes of 5000 or less, except early on when 250,000 were dealt.

If Yanzhou thinks it will have to make a higher bid, it makes sense to mop up as many shares as it can in the market at $17.45 or less.

Alternatively, if a new bidder has decided to come in, there will be a good opportunity in the next month to buy up all the shares of those who think it is not worth waiting to collect the $17.45, when 50 cents of that may be partly franked, and need not be paid until next March.

Monday's share price action certainly suggested this could be the case, with the price rock steady at $17.40-41 all day whilst this large volume changed hands.

It looks like classic instructions to bid for any shares
that come on to the market at this price.

Either way, it makes a mockery of the Yanzhou bid being fair value. Clearly small investors, Institutions, or one or more new players are happy to buy at what amounts to the bid price. It will be interesting to see if this pattern is maintained in the days and weeks before the December decision time.
Any thoughts ?

 

[noirua]

More thoughts on Monday's dealings. MarketWatch says 1.5 million shares changed hands. That's a lot of small punters buying? Maybe not.
It was in volumes of 5000 or less, except early on when 250,000 were dealt.

If Yanzhou thinks it will have to make a higher bid, it makes sense to mop up as many shares as it can in the market at $17.45 or less.

Alternatively, if a new bidder has decided to come in, there will be a good opportunity in the next month to buy up all the shares of those who think it is not worth waiting to collect the $17.45, when 50 cents of that may be partly franked, and need not be paid until next March.

Monday's share price action certainly suggested this could be the case, with the price rock steady at $17.40-41 all day whilst this large volume changed hands.

It looks like classic instructions to bid for any shares
that come on to the market at this price.

This offer by Yanzhou Coal is an "off market bid". Therefore Yanzhou (through subsidiary Austar Coal mine) are not allowed to buy any shares in the market.

There is a vote of Felix shareholders on 8th December 2009 to approve a scheme for compulsory purchase of stock by Austar Coal mine. If 75% vote in favour, then, Felix Resources must notify the court in Canberra and they will basically rubber stamp this compulsory purchase.
No need for us to move a muscle at that point as Yanzhou will automatically own all the stock.

 

[Quillan]

Thanks for putting me right on the"off market" situation, Noirua.In the past 2 days nearly 3 million shares have been traded. So who is buying these shares?

We can appreciate who is selling,as I stated in the last 2 messages.Are we to assume that private investors are responsible for the purchases? Surely not in this kind of volume?

The sellers yesterday, presumably judging by what was the bid price throughout the day, were easily accommodated, and the price range was only about 7 cents.That's a lot of support, considering it is only just below the total bid price of $17.45, including the special dividend due on completion, so there is little incentive for arbitrage.

Bear in mind that this final dividend may not be fully franked,so the final Yanzhou price could be 10 cents or more below the $17.45.Yesterday's sellers could have been selling at what turns out to be the full final offer price of maybe $17.35?

I believe some entity is building a position, knowing they don't have to make a bid until just prior to 8th December. They know this is virtually a ceiling price until then, unless there is considerable buying pressure beforehand.

 

[noirua]

Thanks for putting me right on the"off market" situation, Noirua.In the past 2 days nearly 3 million shares have been traded. So who is buying these shares?

We can appreciate who is selling,as I stated in the last 2 messages.Are we to assume that private investors are responsible for the purchases? Surely not in this kind of volume?

The sellers yesterday, presumably judging by what was the bid price throughout the day, were easily accommodated, and the price range was only about 7 cents.That's a lot of support, considering it is only just below the total bid price of $17.45, including the special dividend due on completion, so there is little incentive for arbitrage.

Bear in mind that this final dividend may not be fully franked,so the final Yanzhou price could be 10 cents or more below the $17.45.Yesterday's sellers could have been selling at what turns out to be the full final offer price of maybe $17.35?

I believe some entity is building a position, knowing they don't have to make a bid until just prior to 8th December. They know this is virtually a ceiling price until then, unless there is considerable buying pressure beforehand.

It seems more likely that you were right in concluding that small shareholders see a no lose situation in buying Felix stock. The dividend should be fully franked and some Aussies can claim back part of the franking. That doesn't apply to foreigners who can't claim back franking and may be taxed on the non-franked part of the dividend.

As to a company or consortium building up a stake. They would need to get to the 6.25% or 12.5 million shares level quickly. I can't see any signs of picking off the fence, except perhaps in very early trading.

 

[Quillan]

Yes, but if they have already decided to make higher bid prior to 8th December, any shares they can pick up around this price between now and then, is saving them money.
This is not wishful thinking on my part. Each daily pattern of the highs and lows suggests someone is accumulating shares. With such a small spread each day, on relatively large volume, can small investors taking a punt be responsible for 3.7m shares in the past 3 days? A total investment of about $65 million?
The normal daily spread before the FIRB approval announcement was at least 50 cents, often on volume of 500,000 or less.
When I see 250,000 shares marked as a sell, traded within a 15 minute period, according to MarketWatch, this doesn't look like you and me mopping these up.
Any bidder knows the price will stay around the $17.40 level, unless an aggressive purchaser comes in.Then we will know almost for certain that a new bid is forthcoming.
I presume the 6.25% level is a level at which a declared interest has to
be made? That's about 12m shares. At the present daily volume, assuming "they" manage to acquire 500,000 daily, they should just about get there before the 8th December.
If accumulation is happening, I guess it could be a third party confident he may have a bargaining chip to use against the real bidder, but if someone has decided to bid, they will be accumulating now.
Who knows? Someone working inside the potential bid company, will know what is happening. As long as any info can't be traced back, he or she could have sold the info to who knows who?
I'm just stirring it up a bit !!

 

[noirua]

Interesting thoughts Quillan. Any counter bidder may have to line up partners to take a percentage interest in Yarrabee and Moolarben mines. Markets are a bit week at the moment despite the thermal coal price moving back over AU$80 per tonne.
Xstrata could still bid with partner Mitsubishi, though Xstrata may only want the Moolarben and Ashton mines. Xstrata have a big $1 billion interest for a new port in QLD.
http://www.ulancoal.com.au

 

[Quillan]

Perhaps you wrote that before the Quarterly came out, Noirua?
Yarrabee on target to increase production by 1mtpa.
Ashton production up 35% on previous Quarter.
2 new long term semi-soft coking contracts with Chinese mills.
Quarterly sales up 21%.
Stocks increased to 1.4mt, worth more than US$100m.
New Bank Finance facility of $200m in place.
Thermal prices up about 15% to $80.
None of these were known about or were certain at the time of the announcement of Yanzhou's offer, and presumably Deloitte would still say "There have been no material changes" since they made their "Fair Value" Report, because that is what they are paid to say, even at the cost of us shareholders who paid their fee.
Let's hope BHP, Xstrata, Vale et al, see it differently and recognise this as a fantastic opportunity to buy assets which are still in the preliminary stages of the coming explosion in tonnage to be produced.
Any bets on an Indian Company to come charging over the horizon?

TaTa for now !!

 

[noirua]

Fair comment Quillan, though the mining stock slide in prices will not help much and Xstrata's 9.4% fall doesn't help either.

The possible bidders must be concerned about the strict conditions given to Yanzhou in their bid for Felix. This favours Australia and not us shareholders hoping for a counter bid.

Indian bid, no chance I reckon whilst hoping you are right at the same time.

All bidders will be put off now and it looks like Xstrata/Mitsubishi, Anglo American, Peabody and BHP left in the running.

 

[noirua]

As you say Quillan, the bids are persistently in a small range between $17.35 and $17.40. This has continued today and their are lots of small offers taking these bids again in the first hour of trading. I may buy a few when I go back in a moment. Bought a few at $17.38, took a while though, most trades are going through at $17.36. It may be catching, but it feels as if someone is there picking up stock quite quickly, or ...

 

[noirua]

As you say Quillan, the bids are persistently in a small range between $17.35 and $17.40. This has continued today and their are lots of small offers taking these bids again in the first hour of trading. I may buy a few when I go back in a moment. Bought a few at $17.38, took a while though, most trades are going through at $17.36. It may be catching, but it feels as if someone is there picking up stock quite quickly, or ...

A boring post really but if you want to sell Felix stock at around $17.36 there appears to be a buyer sitting there. Price has been between $17.36 and $17.38 for one hour now.
Not a suggestion you should sell but it seems very strange, we shall see. I'm gambling now on a counter-bid.

 

[Quillan]

Flannery's address at today's AGM reads like a CEO defending his Company against an unwelcome bidder. He uses the acronym GFC, standing for the "Great Future For Coal".

He goes on to say that in the greatest recession since 1929, Australian coal sales boomed in the past 12 months, and that China turned from being a net exporter of coal to a 70 million tonne net importer.

He pointed out all the projects we have in the pipeline, which will add to the value of Felix.

Many US Financial Newsletters point to coal as one of the booming Sectors in the years ahead, particularly with the explosion in demand from China and India.

We all know how well Flannery and his Board performed in the past and particularly last year, with really sparkling Results. For that we are all truly appreciative.

But to walk out at this point, removing these assets from shareholders who most probably would be very happy to remain as supporters of the Company, seems pretty odd to me.

We know what the Market thinks of the Bid. It marked Yanzhou up considerably, implying we had been stitched up !!

However, although the Board is not permitted to sing the praises of Felix as an investment whilst the bid has not been finalised by both sets of shareholders. Flannery is doing his very best to exhibit our goods in the market to all the possible bidders, via his address at the AGM today !!

In his heart of hearts I am sure he is praying for BHP or whoever, from OZ, to come to the rescue.

I am keeping a tally of the daily volume. In the past 5 days it has averaged 1.27m shares, almost all posted as sellers. Yet the price doesn't flinch, and today the spread became even tighter, despite nearly a million shares being traded in an hour.

Of the free float of about 100m Shares, excluding Board holdings, more than 6m have changed hands in 5 days. Is it really likely these are being bought up by small investors?

I don't think so. For there to be such a tight 1 or 2 cent spread, with a million shares changing hands, points strongly to a very willing purchaser, with instructions to his brokers to take up all stock which becomes available.

That's how I read it.

 

[noirua]

You just about summed it all up really Quillan as Felix Resources is bound to change hands now whatever we do. The results only matter to a bidder and the presentation seemed to, as you infer, be a come and get us effort whilst supporting the Yanzhou bid. If I represented Yanzhou I might be a bit miffed by all this.

I agree now with your original thoughts earlier in the week that someone is sitting buying all the stock very quietly without pushing it up that much. I watched trading for about 4.5 hours yesterday and bought a few shares over that time, though always bidding at the price offered, as the gannet was there all day.