Resources economic news After deciding to keep interest rates on hold at its November board meeting, the Reserve Bank of Australia (RBA) acknowledged Australia’s key commodity prices have remained significantly lower than earlier in the year, with terms of trade declining by about 13 per cent since the peak last year.
In his monetary policy statement Governor Glenn Stevens says, “At today's meeting, with prices data slightly higher than expected and recent information on the world economy slightly more positive, the Board judged that the stance of monetary policy was appropriate for the time being.”
In recent weeks the RBA has suggested the mining investment boom will end next year, as growth in the major Asian economies stabilises at a slower rate. In its October’s index of commodity prices, a fall of 3.5 per cent was attributed to the prices of coking coal, thermal coal and oil, which were partly offset by increases in the price of iron ore. The price of base metals also declined. In Australian dollar terms, the index fell by 2.2 per cent for the month and 19.1 per cent over the year.
The Australian Bureau of Statistics (ABS) has reported Australia’s trade deficit shrank less than expected in September. Australia's trade deficit narrowed 22 per cent to almost $1.5 billion, as exports eased 1 per cent and imports fell 2 per cent. The ABS also reported on commodities exports for the September quarter, which provides further evidence that the mining boom is cooling. Overall exports sank 6.4 per cent after a rise of 1 per cent in the June quarter. Crude materials exports fell 11.7 per cent and mineral fuels dropped 5.8 per cent. Both types of exports had risen between 1 to 2.5 per cent in the June quarter.
Mining merger deals slump A mining merger and acquisition report issued by Ernst & Young reports the value of deals done within Australia’s mining and metals sector halved to $US14 billion in the first nine months of the year and the number of deals completed was down 17 per cent to 167. The report focuses on mid-tier companies with market capitalisations of less than $5 billion.
A similar report by PricewaterhouseCoopers called
Aussie Mine 2012 - Staying the Courseindicates foreign investment from Asia has spiked in recent months, with a 48 per cent rise in the value of acquisitions, mostly dominated by China, Japan and South Korea. Merger and acquisition activity in the gold sector is expected to rise next year according to PricewaterhouseCoopers Energy's utilities and mining leader Jock O'Callaghan.
''There is an emerging trend for gold producers to diversify away from single-project operations. Rising costs, attractive equity valuations and large global players looking to replenish reserves should drive the takeover activity. China and private equity are also expected to take a close look at the Australian gold sector'', Mr O'Callaghan said.
The report follows a push from Australian Securities Exchange operator ASX Limited
(ASX:ASX) to boost long-term investment in mining for Australia by introducing exploration tax credits, designed to support small and mid-cap companies.
Global miners BHP Billiton Limited
(ASX:BHP) has reportedly started the search for a successor to current CEO Marius Kloppers. According to The Financial Times, Chairman Jac Nasser will head the hunt which is expected to occur over the next one to two years. The global miner has refused to comment on the speculation surrounding Mr Kloppers but says succession planning for the CEO and senior management team is an on-going process.
Rio Tinto Limited
(ASX:RIO) has secured the supply of electricity for its nearly completed $US6 billion Oyu Tolgoi mine in Mongolia. The global mining company has inked a deal with a Chinese power company for the mine’s power, facilitating the mine to deliver the first phase of production in the first half of next year.
Full year guidance Downer EDI Limited
(ASX:DOW) says it is on track to reach its full year earnings and profit targets. Speaking at the engineering company’s annual general meeting, CEO Grant Fenn affirmed the company maintains its guidance despite future market uncertainties. Downer expects to deliver earnings before interest and tax of $370 million and net profit of $210 million in the 2012 financial year.
Macmahon Holdings Limited’s
(ASX:MAH) Chairman has apologised for a recent earnings downgrade and vowed to rebuild market confidence in the contract mining and construction company. Macmahon Holdings lowered its annual earnings guidance in September, to between $20 million and $40 million after which its CEO Nick Bowen resigned.
Ruralco Holdings Limited
(ASX:RHL) has flagged its full year net profit will fall up to 10 per cent from last year, as it battles against industry wide pressures. The agribusiness says weaker sheep and wool prices and a reduction in wool volumes have impacted the profitability and contribution of its agency businesses.
Takeovers and capital raisings Northern Iron Limited
(ASX:NFE) suitor India's Aditya Birla has withdrawn from its takeover proposal following a lengthy due diligence period. The suitor cited continued variance in production at the company’s flagship Sydvaranger project in Norway. Swiss-based Prominvest has also failed to submit a timely final bid.
Australian-based global lithium company Galaxy Resources Limited
(ASX:GXY) says it intends to raise $81 million via a share placement to two cornerstone investors.UK fund Manager M &G Investments and Chinese based and state owned East China Mineral Exploration & Development Bureau will take up the offer. The proceeds will be used to reduce debt, complete a definitive feasibility study for its lithium and potash brine project in Argentina as well as provide additional working capital.
