Resources and mining companies dominating the headlines this week include Rio's record first half profit, ERA's first half loss, Macarthur continuing to urge shareholders to "take no action" and Sundance Resources' hopes of securing a takeover or joint venture.
We speak with Sandfire Resources Managing Director Karl Simich about deposit discoveries at DeGrussa. We also hear from ANZ's Commodities Economist Mark Pervan.
Rio's record profitsRio Tinto Limited
(ASX:RIO) has posted a record first half profit of $US7.8 billion, but missed analyst's expectations of a profit in excess of $US8 billion. Record iron ore prices and a strong Australian dollar have been attributed to a 35 per cent increase in the interim result. Rio has extended its $2 billion share buyback program and maintained a positive outlook for the remainder of 2011. The global miner has also completed the divestment of its talc business to Imerys for $US340 million, taking the total proceeds from divestments to more than $US11 billion since 2008.
Sandfire DeGrussa projectRecently Sandfire Resources
(ASX:SFR) said it would borrow $360 million to advance its wholly owned DeGrussa copper-gold project in Western Australia. The announcement comes after the completion of DeGrussa's Definitive Feasibility Study.
Speaking with the Finance News Network, Sandfire Resources Managing Director Karl Simich says he expects to make many more deposit discoveries at DeGrussa.
"Geologically these deposits often form in clusters, they normally have multiple lenses of mineralisation and they normally go very deep and they're high grade. Now we've only really been exploring for a very brief period of time really when you put it in perspective and we've already made this discovery. So we think there's huge potential for further things to occur.
"To think that we've just discovered the best thing, and the only thing and everything in a short period of time would be absolutely, almost misleading to say that. The likely scenario ... is that this is only the beginning of something else ... But it would almost inconceivable that there is no further ... payable mineralisation of this nature anywhere in that province ... it's very, very early days," said Mr Simich.
First mining at DeGrussa has already begun and Sandfire says the project is on track to produce its first high-grade copper ore at the start of 2012.
ERA's wet weather lossesRio's subsidiary Energy Resources of Australia Limited
(ASX:ERA) has swung from a profit to a loss in the first half of 2011. The uranium miner was impacted by wet weather in the period, forcing the suspension of its Ranger Mine operations in the Northern Territory. As a result the company moved from a profit of $22.7 million in 2010 to a loss of $121.75 million. Energy Resources believes the future for uranium is strong, forecasting continued price and demand growth with long-term demand exceeding planned supply.
Macarthur says bid not hostileTakeover target Macarthur Coal Limited
(ASX:MCC) refuted reports that Peabody Energy and ArcelorMittal $4.7 billion bid was hostile. Instead, the Queensland-focused coal producer says it remains in positive talks with the bidders. Macarthur does not believe it can recommend the bid at this stage due to certain conditions, such as not being able to hold talks with potential suitors. CEO Nicole Hollows has reiterated her advice to Macarthur shareholders to "take no action" and advised that Macarthur is in talks with additional parties. Ms Hollows also revealed she is unsure of Citic Resources' stance on the deal, the company being Macarthur's largest single shareholder.
Sundance eyes JVSundance Resources Limited
(ASX:SDL) Chairman George Jones has confirmed the iron ore explorer is hoping to secure a takeover or joint venture by the end of this year. Sundance last month received a $1.4 billion takeover offer from its largest shareholder, China's Hanlong Mining. However, the company's flagship Mbalam Iron Ore Project in West Africa is still waiting on government approval and needs to secure financing. Mr Jones believes once these issues are cleared a takeover of JV deal could be on the cards.
Resources NewsTreasurer Wayne Swan is pinning his hopes on the strength of global commodity prices, as concerns about the global economy grow. Mr Swan pointed to strong fundamentals, saying Australia's position in Asia was a significant factor helping the economy weather the storm. He rejected concerns the carbon tax would weaken confidence in the local economy.
The Reserve Bank has cut the forecast for growth in Australia's gross domestic product citing weaker than expected recovery in Queensland's coal industry, due to flooding earlier this year. The RBA nonetheless expects a "large increase" in mining investment.
"Conditions are expected to remain very strong in the mining industry, as well as those parts of the economy benefiting from high rates of resources sector investment and output and from the income effects from high commodity prices," said the RBA.
Mining investment is expected to rise to more than 6 per cent of Australia's $1.3 trillion of gross domestic product. Resource export volumes are expected to increase, with a focus on liquefied natural gas.
CommoditiesAustralia posted a trade surplus of $2.05 billion in June, seasonally adjusted. It's the eighth time there's been a surplus above $2 billion, driven by the recent mining boom. Commodities Economist Mark Pervan from ANZ says the trade data was largely positive.
"Still very solid iron ore and coal numbers coming through. Where we did see a drop was in the gold exports, it was off nearly fifty percent. I think probably the main factor there is that market is very price sensitive, and so we've seen record high gold prices, our main customers, mainly the Indians, and the Chinese tend to be pretty price sensitive so are probably pulling back on demand in the near term until prices stabilise. But otherwise, it was a pretty good result. Also strong imports coming in as well," said Mr Pervan.
Melissa Beaumont Lee
