Reporting season is upon us, but the results have been overshadowed by extreme market volatility. The major miners moved to hose down fears of a global slowdown and reaffirmed China's appetite for local resources. We speak exclusively with Beach Energy Managing Director Reg Nelson about the surprise discovery in the Cooper Basin. We also hear from NAB Commodities Economist Ben Westmore.
BlueScope cuts productionBlueScope Steel Limited
(ASX:BSL) has flagged it will cut half its production at Port Kembla, halt exports and writedown $900 million of its asset values. It follows a review of its Australian steelmaking production capacity. Australia's largest steelmaker says further writedowns and production cuts may be necessary. The move is in response to increasing material costs, low prices and the high Australian dollar.
Beach Energy surprise gas resourceBeach Energy Limited
(ASX:BPT) has found two trillion cubic feet of gas in two wells in the Cooper Basin. Most surprisingly, these shale gas wells were only meant to be for gathering data.
The Finance News Network spoke exclusively with Beach Energy Managing Director Reg Nelson about the discovery.
"We're on the tip of discovering a very huge resource," said Mr Nelson.
"It's hugely significant, it's early days and we still have a lot of work to do. But if we prove the potential of what we think is there, the closest analogy I can draw is to the Haynesville Shale in the US."
"We've drilled two vertical wells this year, they were very much data gathering wells, they weren't intended to be as production wells, they really were there to allow us to assess which formations to target when we do drill a production well. So having achieved flow rates of that order from one of these wells, I guess the next step will be in fact to clean out the next well and go back and do some ... stimulation tests on that, probably later this year and then certainly within the first half of next year we'll drill the first of probably three horizontal pilot production wells," added Mr Nelson.
Rio dismisses concernsRio Tinto Limited's
(ASX:RIO) CEO, Tom Albanese, has dismissed concerns the commodity boom could be softening. Mr Albanese believes the global miner's European, US and Chinese markets continue to be strong, forecasting up to 9.5 per cent growth in China this year. In the week just gone Rio and trading house Mitsubishi Development launched a joint takeover bid for Coal & Allied Industries Limited
(ASX:CNA). The two companies have offered $122 per share to buy out minority investors in the coal miner. The deal values Coal & Allied at $10.6 billion.
BHP remains confidentBHP Billiton Limited
(ASX:BHP) chairman, Jac Nasser, has affirmed he remains "very confident" about the medium to long-term China growth story. In a week that saw global markets wobble in the face of debt concerns, Mr Nasser said Australians should feel quietly confident, but not complacent. Last week BHP announced it will buy Leighton Holdings Limited
(ASX:LEI) HWE iron ore business in Western Australia's Pilbara region for $705 million. HWE currently generates around $1.1 billion in annual revenue.
Alumina profit disappointsAlumina Limited
(ASX:AWC) increased its first half net profit by 54 per cent to $US67.7 million, but the figure was below market expectations. In the six months to June 30 underlying earnings rose to $US78 million, from $US22 million the year before. The aluminium maker's result was boosted by the demand for the metal, higher alumina production and prices. Alumina CEO John Bevan says, "Much of this growth has been driven by Chinese industrialisation, with China now established as a major consumer and producer of aluminium". Alumina has declared an interim fully franked dividend of 3 cents per share.
Resources NewsThe mining tax is facing hurdles in parliament after Liberal senator Mathias Cormann signaled a move to suspend consideration of the tax. Mr Cormann is demanding the government release revenue assumptions. Greens leader Bob Brown is pressuring the government to release the information which will include expected commodity price movements and production.
The government has to date argued that the information provided by BHP Billiton, Rio Tinto and Xstrata is confidential and should not be released.
CommoditiesCommodities Economist Ben Westmore from NAB says the volatility on financial markets has had a negative effect on commodities.
"That [the volatility] really hasn't been kind to anyone's forecasts in demand growth for industrial production going forward. And as a result all of those commodities that are leveraged into production activity have fallen quite heavily … The only commodity class that's really shown a divergence from that trend has been the precious metals, especially gold."
Melissa Beaumont Lee
