Deloitte Access Economics’ latest investment monitor reveals investment in Australian mineral resources continues to surge. Resources and mining companies dominating the headlines this past week include OneSteel trimming expected first half earnings, Brockman Resources’ Marillana iron ore deposit is delayed, Santos predicts the price of gas will more than double, Kingsgate posts a drop in first quarter production and Carabella announces an increase to the existing JORC Resource as its flagship Grosvenor West coking coal project.
OneSteel guidance hit
OneSteel Limited (ASX:OST) has blamed a strong Australian dollar and softer iron ore prices for cutting into its expected first half earnings. The steel maker now expects to deliver a first half net profit of between $55 million and $75 million, compared with $116 million achieved in 2010. The company is also expected to take an extra $20 million hit, due to transaction costs relating to its $346 million acquisition of WPG Resources Limited (ASX:WPG) iron ore assets. OneSteel says the price of iron ore has now fallen about 30 per cent from $US170 per tonne three weeks ago.
Brockman iron ore project delayed
The development of Brockman Resources Limited (ASX:BRM) owned Marillana iron ore deposit in the Pilbara has been delayed because of Wah Nam’s hostile takeover of Brockman earlier this year. A bankable feasibility study was due by the end of October but Wah Nam says the review won’t be completed for another month at the earliest because the feasibility study would need to be “deferred until a revised timetable has been prepared for the project”. The deposit has an estimated 1.6 billion tonne haematite resource. Speculation has emerged that Fortescue Metals Group (ASX:FMG) could be planning to become a partner in the project.
Santos says gas price will more than double
Oil and gas producer Santos Limited (ASX:STO) believes increasing demand could see the price of gas more than double in the next 20 years. Appearing at the Opportunities and Challenges for Australian Gas conference, Santos said the forecast price increases will make the development of extensive additional resources economic for the first time. Australian gas prices now sit at around $4 a gigajoule and Santos believes they could rise up to $9 a gigajoule. Santos’ acquisition of Eastern Star Gas Limited (ASX:ESG), and the company’s coal seam gas resource in New South Wales was approved last month by the takeover target’s shareholders.
Kingsgate Q1 output falls
Gold producer Kingsgate Consolidated Limited (ASX:KCN) has posted an 11 per cent drop in first quarter production. Output fell at its Thailand operations due to monsoonal rains restricting road and pit access. The company’s Challenger mine in South Australia was impacted by a water shortage due to a water bore failure restricting ore treatment through the process plant. In the September quarter Kingsgate says it achieved gold sales of 33,330 ounces at $US1,699 per ounce and maintained a strong operating cash margin.
Carabella announces 53% coking coal upgrade
Junior coal explorer Carabella Resources Limited (ASX:CLR) has announced a 53 per cent increase to the existing JORC Resource as its flagship Grosvenor West coking coal project in Queensland. The revised JORC Resource estimate now sits at 145.8 million tonnes.
Commenting on the announcement, Carabella’s managing director Anthony Quinn says the upgrade, “supports our view that Grosvenor West is a quality coking coal deposit”.
Mr Quinn has advised that prior to the wet season the company plans to complete its stage one drilling program and start a reconnaissance drilling program at other prospective targets.
Last month Carabella confirmed that it had received several unsolicited expressions of interest for the Grosvenor West project and that it is working with interested parties to facilitate due diligence.
Deloitte Access Economics has released its latest investment monitor, revealing investment in Australian mineral resources continues to surge. Mining accounted for $393 billion of total investment projects in the country. During the September quarter liquefied natural gas projects drove investment growth with Asian demand for coal and iron ore also remaining strong.
The report says, "It is no surprise then that the prospects for coal mining in Australia look bright, with the demand for Australian coal continuing to be underpinned by the growth in emerging economies such as China and India".
Melissa Beaumont Lee
Photo courtesy of Peter Craven