NOVEMBER 2010 1 ASX RESOURCES - GROUP 150 We are pleased to present the November edition of ‘Group 150’, a ranking of the top 150 ASX listed resources companies (excluding oil and gas), by market capitalisation. The market value of the Group 150 at the end of September was $545 billion, up 7.6% from September and an incredible 56.9% increase from $360 billion since 30 June 2009. The entry point into the Group 150 for October was $103 million versus $95 million for September. The ASX/S&P 200 Resources Index rose 5.1% in the month, while the ASX All Ordinaries and ASX/S&P 200 Index increased 2.1% and 1.7% respectively. During October we witnessed a resurrection in resource sector M&A, with a special shine on copper. Activity involving the “bellwether metal” included Equinox’s offer for Citadel, Kingsgate’s offer for Laguna, Perilya’s offer for GlobeStar Mining and Kagara’s offer for Copper Strike, as well as Sandfire and LS-Nikko mutually agreeing to terminate the heads of agreement. While both primary and secondary copper supply remains constrained, we would not be surprised to see this level of M&A activity continue. In this edition of the Group 150 we provide an overview of the relative market rating of the ASX listed copper peers using Enterprise Value/lb of copper resource, adjusted for the cost of near term “committed” development expenditure. Market fundamentals remain strong with China currently consuming ~40% of the world’s copper production while only holding ~6% of the worlds reserves domestically which is likely to support prices at current, if not higher levels. Copper finished the month at US$8,225/t, up 26% from US$6,515 at 30 June 2010. At these price levels, any sound operating mine even a 4th quartile producer should be generating reasonable levels of cashflow. While the MRRT remains a potential impost for the domestic resources sector, we have witnessed a resurgence of risk capital returning to the sector with numerous miners having executed successful capital raisings in the past 2 months. West African gold and companies with offshore coal projects have been the major beneficiaries of recent equity raisings. During October both Paladin and Western Areas refinanced corporate bonds to extend the debt maturity profiles. The average market value of domestic focussed companies since the proposed MRRT was announced has increased 55.5% compared to international focussed peers increasing by 74.1%. Global diversified companies have increased in value by nearly 100% during the same period. Gresham Advisory Partners Limited GROUP 150 November 2010 Edition 8 Darren Martin Gresham Advisory Partners [email protected]+61 8 9486 7077 +61 412 144 719 Gresham Advisory Partners is a leading Australian mergers and acquisitions/corporate advisory business and one of Australia’s largest and highest ranking independent corporate advisors.
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NOVEMBER 2010
1
ASX RESOURCES - GROUP 150We are pleased to present the November edition of ‘Group 150’, a ranking of the top 150 ASX listed resources companies (excluding oil and gas), by market capitalisation.
The market value of the Group 150 at the end of September was $545 billion, up 7.6% from September and an incredible 56.9% increase from $360 billion since 30 June 2009. The entry point into the Group 150 for October was $103 million versus $95 million for September. The ASX/S&P 200 Resources Index rose 5.1% in the month, while the ASX All Ordinaries and ASX/S&P 200 Index increased 2.1% and 1.7% respectively.
During October we witnessed a resurrection in resource sector M&A, with a special shine on copper. Activity involving the “bellwether metal” included Equinox’s offer for Citadel, Kingsgate’s offer for Laguna, Perilya’s offer for GlobeStar Mining and Kagara’s offer for Copper Strike, as well as Sandfire and LS-Nikko mutually agreeing to terminate the heads of agreement. While both primary and secondary copper supply remains constrained, we would not be surprised to see this level of M&A activity continue. In this edition of the Group 150 we provide an overview of the relative market rating of the ASX listed copper peers using Enterprise Value/lb of copper resource, adjusted for the cost of near term “committed” development expenditure.
Market fundamentals remain strong with China currently consuming ~40% of the world’s copper production while only holding ~6% of the worlds reserves domestically which is likely to support prices at current, if not higher levels.
Copper finished the month at US$8,225/t, up 26% from US$6,515 at 30 June 2010. At these price levels, any sound operating mine even a 4th quartile producer should be generating reasonable levels of cashflow.
While the MRRT remains a potential impost for the domestic resources sector, we have witnessed a resurgence of risk capital returning to the sector with numerous miners having executed successful capital raisings in the past 2 months. West African gold and companies with offshore coal projects have been the major beneficiaries of recent equity raisings. During October both Paladin and Western Areas refinanced corporate bonds to extend the debt maturity profiles.
The average market value of domestic focussed companies since the proposed MRRT was announced has increased 55.5% compared to international focussed peers increasing by 74.1%. Global diversified companies have increased in value by nearly 100% during the same period.
Gresham Advisory Partners is a leading Australian mergers and acquisitions/corporate advisory business and one of Australia’s largest and highest ranking independent corporate advisors.
Top 150 ASX LiSTed reSource compAnieS - ocToberBy Market Capitalisation
Group 150
2
Mkt Cap (A$m) % Mkt Cap (A$m) %
Oct Sep Company 31-Oct-10 30-Sep-10 Change Oct Sep Company 31-Oct-10 30-Sep-10 Change
copper – A beLLweTher meTALDuring October we witnessed a resurrection in resource sector M&A, with a particular special shine on copper. Activity in the sector included Equinox’s offer for Citadel, Kingsgate’s offer for Laguna and Kagara’s offer for Copper Strike and Perilya’s offer for GlobeStar Mining, as well as Sandfire and LS-Nikko mutually agreeing to terminate the heads of agreement. While both primary and secondary copper supply remains constrained, we would not be surprised to see this level of M&A activity continue.
Copper finished the month at US$8,225/t, up 26% from US$6,515 at 30 June 2010. Global copper market fundamentals remain strong with China currently consuming ~40% of the world’s copper production while only holding ~6% of the worlds reserves domestically.
Market commentators consider of the base metals, copper has the best fundamentals, with the markets forecast to move to a deficit in CY2011 and hence support the copper price for the 1 - 2 years.
The charts below provide an overview of the copper market and relative market rating of the ASX listed copper peers.
Source: Gresham, Company ReportsSource: IRESS, Company reports. Trading as at 1 November 2010. Net Debt (for Enterprise Value calculation) taken as at 30 June 2010 with the exception of Aditya Birla Minerals (31 March 2010 ) and Hillgrove (31 July 2010)
20 Year Relative Movements & Copper Forward Curve
Cu Resource (billion lb)
0
3
6
9
12
15
Indo
phil
Equi
nox OZ
Mar
engo
PanA
ust
Anvi
lAd
itya
Birla
Disc
over
yAl
tona
Tige
r Res Rex
Cita
del
Sand
fire
Aval
onHa
vila
hEx
coBl
ackt
horn
Stra
itsCu
deco
Hillg
rove
Copp
er St
rike
Vent
urex
Re
dban
kQ
LD M
inin
g
Cu R
esou
rce
(bill
ion
lb)
30 19
0.00
0.10
0.20
0.30
0.40
0.50
0.60
0.70
0.80
0.90
1.00
Cita
del
Sand
fire
Stra
its OZ
PanA
ust
Cude
coCo
pper
Strik
eEx
coRe
dban
kHi
llgro
veVe
ntur
ex
Anvi
lEq
uino
x Al
tona
QLD
Min
ing
Rex
Disc
over
yTi
ger R
esAv
alon
Blac
ktho
rnAd
itya
Birla
Havi
lah
Mar
engo
Indo
phil
EV A
$/lb
(Cu)
EV / lb of Cu Resource (A$/lb)
Additional bar represents cost of near term “committed” development expenditure
Group 150
6
Group 150 - “mrrT impAcT” - bASed on projecT/S LocATion
Only 148 companies in October, September and August data set as Astron Resources and Guildford Coal were new IPO’s during the periodOnly 149 companies in July data set as Guildford Coal was new IPO’s during the period
Monthly Performance Overseas Domestic Overseas/ Domestic Total
End of October
Spread of "Group 150" by Project/s Location 53 77 18 148
- Simple Average Return 74.1% 55.5% 99.5%
End of September
Spread of "Group 150" by Project/s Location 51 81 16 148
- Simple Average Return 49.1% 42.3% 27.3%
End of August
Spread of "Group 150" by Project/s Location 47 85 16 148
- Simple Average Return 14.1% 20.0% 13.7%
End of July
Spread of "Group 150" by Project/s Location 49 84 16 149
- Simple Average Return 7.6% 15.4% 14.3%
Mar
ket C
apit
alis
atio
n -
Perf
orm
ance
Sin
ce P
ropo
sed
MRR
T A
nnou
nced
While the MRRT remains a potential impost for the domestic resources sector, we have witnessed a resurgence of risk capital returning to the resources sector. Numerous miners have executed successful capital raisings in the past 2 months as the risk appetite of investors has improved. West African gold and companies with offshore coal projects have been the major beneficiaries of recent equity raisings. During October both Paladin and Western Areas refinanced corporate bonds to extend the debt maturity profiles.
The average market value of domestic focussed companies since the proposed MRRT was announced has increased 55.5% compared to international focussed peers increasing by 74.1%. Global diversified companies have increased in value by nearly 100% during the same period.
NOVEMBER 2010
7
Share Price Performance - October 2010
Share Price Performance - Since 30 June 2010
Share Price Performance - Since 1 Jan 2010
bASe meTALS - SecTor performAnce
Shar
e Pric
e Per
form
ance
Shar
e Pric
e Per
form
ance
Shar
e Pric
e Per
form
ance
Copper Nickel Zinc
Group 150
8
Share Price Performance - October 2010
Share Price Performance - Since 30 June 2010
Share Price Performance - Since 1 Jan 2010
coAL - SecTor performAnce
Shar
e Pric
e Per
form
ance
Shar
e Pric
e Per
form
ance
Shar
e Pric
e Per
form
ance
NOVEMBER 2010
9
Share Price Performance - October 2010
Share Price Performance - Since 30 June 2010
Share Price Performance - Since 1 Jan 2010
diverSified - SecTor performAnce
Shar
e Pric
e Per
form
ance
Shar
e Pric
e Per
form
ance
Shar
e Pric
e Per
form
ance
induSTriAL minerALS - SecTor performAnce
Shar
e Pric
e Per
form
ance
Shar
e Pric
e Per
form
ance
Shar
e Pric
e Per
form
ance
Group 150
10
Share Price Performance - October 2010
Share Price Performance - Since 30 June 2010
Share Price Performance - Since 1 Jan 2010
GoLd - SecTor performAnce
Shar
e Pric
e Per
form
ance
Shar
e Pric
e Per
form
ance
Shar
e Pric
e Per
form
ance
NOVEMBER 2010
11
Share Price Performance - October 2010
Share Price Performance - Since 30 June 2010
Share Price Performance - Since 1 Jan 2010
iron ore - SecTor performAnce
Shar
e Pric
e Per
form
ance
Shar
e Pric
e Per
form
ance
Shar
e Pric
e Per
form
ance
Group 150
12
Share Price Performance - October 2010
Share Price Performance - Since 30 June 2010
Share Price Performance - Since 1 Jan 2010
urAnium - SecTor performAnce
Shar
e Pric
e Per
form
ance
Shar
e Pric
e Per
form
ance
Shar
e Pric
e Per
form
ance
NOVEMBER 2010
13
conSenSuS commodiTy price forecASTS - ocTober
Source: Bloomberg Consensus Estimates - Median / High / Low
Terms and ConditionsInformation contained in this publicationThe opinions, advice, recommendations and other information contained in this publication, whether express or implied, are published or made by Gresham Advisory Partners Limited (ABN 88 093 611 413), Australian financial services license (247113), and by its officers and employees (collectively “Gresham Advisory Partners”) in good faith in relation to the facts known to it at the time of preparation. Gresham Advisory Partners has prepared this publication without consideration of the investment objectives, financial situation or particular needs of any individual investor, and you should not rely on the publication for the purpose of making a financial decision. To whom this information is providedThis publication is only made available to persons who are wholesale clients within the meaning of section 761G of the Corporations Act 2001. This publication is supplied on the condition that it is not passed on to any person who is a retail client within the meaning of section 761G of the Corporations Act 2001.Disclaimer and limitation of liabilityTo the maximum extent permitted by law, Gresham Advisory Partners will not be liable in any way for any loss or damage suffered by you through use or reliance on this information. Gresham Advisory Partners’ liability for negligence, breach of contract or contravention of any law, which cannot be lawfully excluded, is limited, at Gresham Advisory Partners’ option and to the maximum extent permitted by law, to resupplying this information or any part of it to you, or to paying for the resupply of this information or any part of it to you.No warranties made as to contentGresham Advisory Partners makes no warranty, express or implied, concerning this publication. The publication provided by us on an “AS IS” basis at your sole risk. Gresham Advisory Partners expressly disclaims, to the maximum extent permitted by law, any implied warranty of merchant-ability or fitness for a particular purpose, including any warranty for the use or the results of the use of the publication with respect to its correctness, quality, accuracy, completeness, or reliability.CopyrightCopyright in this publication is owned by Gresham Advisory Partners. You may use the information in this publication for your own personal use, but you must not (without Gresham Advisory Partners’ consent) alter, reproduce or distribute any part of this publication, transmit it to any other person or incorporate the information into any other document.General mattersThese Terms and Conditions are governed by the law in force in the State of Victoria, and the parties irrevocably submit to the non-exclusive jurisdiction of the courts of Victoria and courts of appeal from them for determining any disputes concerning the Terms and Conditions.If the whole or any part of a provision of these Terms and Conditions are void, unenforceable or illegal in a jurisdiction it is severed for that jurisdiction. The remainder of the Terms and Conditions have full force and effect and the validity or enforceability of that provision in any other jurisdiction is not affected. This clause has no effect if the severance alters the basic nature of the Terms and Conditions or is contrary to public policy.If Gresham Advisory Partners do not act in relation to a breach by you of these Terms and Conditions, this does not waive Gresham Advisory Partners’ right to act with respect to subsequent or similar breaches.
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Pure Energy Resources Limited.
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of Gallery Gold.
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$178m takeover offer by Mineral
Resources Limited.
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competing takeover offer by Crosby and Antogafasta/Barrick.
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institutional placement and
$353m accelerated right issue.
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Resources on its financing with
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$54m Narama coal divestment to
Xstrata.
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on its joint venture with Mitsubishi.
2010
2010
Advised BHP Billiton on its
US$116bn iron ore production
joint venture with Rio Tinto.
2010
Introduced Denham Capital to
Trans Tasman Resources resulting
in NZ iron sands investment.
2010
2009
Advised Indophil on $545m
recommended offer from Zijin
2010
Advised BHP Billiton on the disposal of the Yabulu Nickel
refinery.
2009
Advised Allied Gold on its $54m
acquisition of Australian
Solomons Gold.
2009
Advised Brandrill Limited on its
$45m takeover offer by Ausdrill
Limited.
2009
2008
Advised Kalahari Minerals on its
$140m proposed merger with
Extract Resources.
2008
Advised Centaurus
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with Glengarry Resources.
2010
2009/08
2008
Advised Summit Resources on its
A$1.2bn takeover by Paladin Energy.
2007
2008
2006
2007
2008
Advised Guandong Rising on its $216m
cornerstone investment in Pan
Aust.
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Advised Energy Metals on its $86m
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Guangdong Nuclear Power Group.
2009
Mergers and Acquisitions
Takeover Defence
Strategic Advisory, Joint Ventures and Capital Markets
recenT reSourceS TrAnSAcTionS
Takeover Defence
Strategic Advisory, Joint Ventures and Capital Markets