Resources and Mining Report - 08/07/11

Resources Corner

The resources and mining news dominating the front pages is the Government's carbon tax policy. Companies in the headlines over the past week include Murchison Metals' stock sell-off, protests in Sydney against Lynas' Malaysian refinery and its deal with Siemens, tensions rising at Woodside's new gas hub and a fatality at BHP's Port Hedland Operations.

We speak exclusively with Focus Minerals' CEO Campbell Baird regarding the miner's friendly takeover bid for Crescent Gold. We also hear from Commodities Economist Ben Westmore from NAB.


Murchison Oakajee costs blowout

Murchison Metals Ltd (ASX:MMX) shares plunged when the miner admitted it couldn't meet its funding commitments for the $5.9 billion Oakajee port and rail project in Western Australia.  The project is facing cost blowouts and long delays. China's Sinosteel has hardened its opposition to the project, saying the Murchison feasibility studies didn't provide any real update. Media reports suggest that simply selling parts of the business will not fix the funding problems the miner is facing and that a corporate transaction may be the only solution.


Crescent Gold accepts Focus bid

Crescent Gold Ltd (ASX:CRE) directors have accepted Focus Minerals Ltd's (ASX:FML) $68 million friendly takeover bid for the company. Focus is offering 1 of its shares for every 1.18 Crescent shares, representing a 30.5 per cent premium based on the closing price on June 17. Crescent's directors have accepted the offer and recommended all Crescent shareholders also accept.

Focus Minerals' CEO Campbell Baird spoke exclusively with the Finance News Network and said the takeover will see the company become one of Australia's top five gold producers.

“It propels us overnight into the big, big league. We'll be one of the top five Australian based gold producers. We're a one hundred percent Australian company producing one hundred percent of our gold in Australia and there's only about four of them above us who are doing that,” Mr Baird said.

“It propels us up into the region of St Barbara, the new Conquest Catalpa merger, we're going to be up there with the likes of those guys and Regis. It really is going to be one of the major mining houses in Australia.”


Lynas protests and joint venture with Siemens

Opposition has intensified against Lynas Corporation Ltd's (ASX:LYC) planned rare earths refinery in Malaysia. A dozen activists, many of whom had flown in from Malaysia, protested in front of the company's Sydney headquarters and were dressed in protective suits, holding radiation hazard signs. 200,000 residents live within a five kilometre radius of the plant. Lynas says it has abided by international safety standards.

Meanwhile, Lynas says it is teaming up with German engineering giant Siemens to establish a joint venture to make magnets. Lynas will provide the raw materials and hold a 45 per cent stake in the joint venture company.


Tensions escalate at $30B Woodside project

Tensions have continued to escalate at Woodside Petroleum Ltd's (ASX:WPL) planned $30 billion gas hub at James Price Point in Western Australia, due to environmental and native title concerns. According to media reports the oil and gas producer this week broke through a blockade of activists who have been protesting against the project for more than one month. Police have reportedly arrested some of the protestors. Woodside is understood to have now started clearing vegetation. The company maintains that the work is lawful, as it moves closer to making a final investment decision on the project.


BHP fatality

BHP Billiton Ltd (ASX:BHP) reported a fatality at their Port Hedland operations in Western Australia. It's reported that a boom crane fell on top of the 27-.year-old, killing him. The company's iron ore operations were put on hold due to the accident. The deceased was an employee of conveyor belt company Fenner Dunlop, contracted to the BHP site. It's the seventh fatality at BHP operations in Western Australia in the past five years.


Resources News

The federal government unveiled its carbon price scheme on Sunday, confirming that it plans to place a carbon tax of $23 a tonne on its 500 worst polluters from 2012.

Prime Minister Julia Gillard said the worst polluting companies would have to pay a $23 price that would rise by 2.5 per cent a year, before the minority government moved to a controversial market-based emissions scheme in mid-2015.


Commodities

The NAB's Minerals and Energy Economist Ben Westmore says there's been an increase in the price of oil, but gold prices have dropped marginally as investors feel a little less nervous about the state of the world economy.

“It's been a little bit of a mixed ride, we've seen in oil there's been some pick up in prices and that follows a couple of weeks of quite subdued, or fall in prices, part of that has been a result of some scepticism around the earlier plan of the International Energy Agency to release emergency oil stocks onto the market,” he said.

“And some sceptics question whether all those stocks will enter the market. Of course, if you have lower oil supply than expected, that tightens the market and it causes prices to move higher and that's what we've seen in some of the oil benchmarks in the last week or so.
“Outside of that we've seen gold prices come off a little ... following some abatement in concerns around the Greek sovereign debt situation.”


- Melissa Beaumont Lee

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