Resources. corrs. Insights and trends for the leading edge of the resources industry. Introduction. Recent Announcements

Transcription

1 corrs Australian Resources Sector Update JUNE 2012 Insights and trends for the leading edge of the resources industry Introduction Welcome to the June edition of the Australian Resources Sector Update, a monthly publication prepared by Corrs Chambers Westgarth for clients who are interested in the Australian resources industry. This publication brings together a brief summary of information on recently completed deals, market rumours and potential opportunities, and relevant regulatory updates. Recent Announcements ASX-listed Fortescue Metals Group Ltd announced on 13 June 2012 that it has agreed with China s Baosteel to consolidate their interests in the Glacier Valley and Northstar mining leases into FMG Iron Bridge Ltd, a Hong Kong-based subsidiary of Fortescue. Upon completion of this transaction, Fortescue will hold 88% and Baosteel will hold 12% of FMG Iron Bridge. The transaction is subject to Australian Foreign Investment Review Board approval and Chinese State-Owned Assets Supervision and Administration Commission approval. Fortescue has also recently announced that it has secured USD$490 million in corporate senior debt facilities supported by European Export Credit Agencies. The facilities will be used to help finance Fortescue s 155 million tonnes per annum (mtpa) expansion program and associated mine fleet of its Pilbara iron ore operations in Western Australia. ASX-listed Aquila Resources announced on 6 June 2012 that it expects to settle the sale of its 50% interest in the Isaac Plains Coal Mine to Japan s Sumitomo Corporation in July The sale was subject to Brazil s Vale, the other joint venture party, not exercising its pre-emptive right within the 60 day preemptive right period. The pre-emptive right period has lapsed and the sale is now only subject to receipt of standard Indicative Approvals under the Mineral Resources Act 1989 (Qld). In response to queries from the ASX regarding a share price and volume spike, ASX-listed Platinum Australia announced on 7 June 2012 that it continues to assess potential mergers and other opportunities on an ongoing basis. Platinum further noted that these discussions are only at a preliminary stage. ASX-listed Whitehaven Coal announced on 13 June 2012 that it received an indicative, non-binding proposal from Tinkler Group Pty Ltd, an entity controlled by Nathan Tinkler, to privatize Whitehaven. Whitehaven has expressed that the current proposal is highly conditional and incomplete. A committee of directors not associated with the bidder has been established to consider any future developments of this proposal. 1 Following the announcement on 13 June 2012, the Australian Financial Review reported that Tinkler, who currently holds a 21.6% interest in Whitehaven, could offer between $5.00 and $5.50 per Whitehaven share. The report also noted that Tinkler Group Pty Ltd is seeking USD$2.5 billion to fund the offer. On 15 June 2012, the Board of ASX-listed Coalworks recommended that its shareholders accept the revised offmarket takeover bid by ASX-listed Whitehaven Coal for all of Coalworks shares. Whitehaven s current offer is AUD$1.00 for each Coalworks share plus an in specie distribution to Coalworks shareholders who are on the register on 26 June 2012 of shares in Orpheus Energy Limited, a company held by Coalworks. On 20 June 2012, Whitehaven announced that it now has a voting power in more than 50% of the issued shares in Coalworks and that the offer is automatically extended until 7:00 pm on 4 July In related news, Macquarie, a substantial shareholder of Coalworks, withdrew its resolution for the Coalworks general meeting on 15 June 2012 to replace two of the three Coalworks directors. The withdrawal is due to Coalworks agreement to Whitehaven s revised and unconditional offer. On 13 June 2012, ASX-listed Gloucester Coal s merger with Chinese-owned Yancoal Australia received approval from the Supreme Court of Australia. As a result, Gloucester has announced that it will pay out a special dividend of $0.47 cash 1 Corrs is advising the Whitehaven Coal committee on this transaction. MAKING BUSINESS SENSE

2 per share to shareholders. This is $0.03 per share higher than the approximate amount of $0.44 referred to in the Explanatory Booklet. The Court s order is expected to be lodged with ASIC on Wednesday, 27 June 2012, at which time the miner will cease to trade as Gloucester Coal on the ASX. India s GVK recently received Queensland Coordinator General s Report on the environmental clearance for its $10 billion Alpha coal and rail project in Queensland. The project is expected to provide at least 60 mtpa of thermal coal for Asian markets and will be the first integrated mine, rail and port coal project in Australia. Currently, the environmental approval at the federal level is still outstanding. Despite reported opposition from the Federal Government against the grant of approval, GVK announced on 5 June 2012 that it will work together with the Federal Government to achieve a positive outcome for the project. Various media sources including Reuters, The Economic Times and Today Online have reported that GVK is looking to sell a minority stake in GVK Coal Developers (Singapore) Pte Ltd as soon as possible to fund GVK s Australian projects. Listed South Korean wholesaler LG International Corp. recently announced that it has made a first round bid to acquire USbased Peabody Energy s Wilkie Creek mine, which is located in the Surat Basin. In a media release, LG stated that it is considering whether or not to continue with a binding bid for the mine. According to an earlier report, the Wilkie Creek mine produces 2.75 million tonnes of coal per year and is expected to be valued between USD $500 million and USD $750 million. On 8 June 2012, ASX-listed Flinders Mines Limited announced that the appeal to lift an injunction blocking Russia s MMK s acquisition of Flinders has been rejected by the Russian court. The next court hearing is set down for 2 July 2012, after the quit date of 30 June 2012 under the Scheme Implementation Agreement between MMK and Flinders. The media has reported that Flinders is now under pressure from institutional investors and hedge funds to actively explore other options. ASX-listed Rocklands Richfield announced on 26 June 2012 that Linyi Mining Group Co Ltd, a subsidiary of China s Shandong Energy, has successfully acquired India s Jindal Steel & Power s 27.19% interest in Rocklands at AUD$0.52 per share. Shandong s initial offer to acquire all of the issued shares in Rocklands was made on 21 May Upon Jindal Steel s acceptance of Shandong s offer, Shandong s interest in Rocklands increased from 25.27% to 52.46%. Recently Completed Deals On 19 June 2012, ASX-listed Whitehaven Coal announced that it has completed the sale of 10% of its interest in the Maules Creek joint venture to J-Power Australia Pty Ltd, a wholly owned subsidiary of Japan s Electric Power Development Co., Ltd. The current Maules Creek joint venture participants are Whitehaven (with a 75% interest), J-Power (with a 10% interest) and an entity associated with Japan s Itochu Corporation (with a 15% interest). The Maules Creek coal project is located at the heart of the Gunnedah Basin and has 362 million tonnes of recoverable reserves. ASX-listed Panoramic Resources Limited acquired 92.24% of the ordinary shares in ASX-listed Magma Metals Limited as a result of Panoramic s off-market takeover bid which closed on 6 June Panoramic lodged notices with ASIC on 14 June 2012 to proceed with compulsory acquisition of the remaining Magma shares. Currently, Panoramic has a market capitalisation of approximately AUD $38 million. market rumors & opportunities The Australian Financial Review reported on 12 June 2012 that Switzerland-based Pala Investments could be interested in acquiring an interest in Barminco, the Australian underground mining contractor. Following the unsuccessful IPO of Barminco in July 2011, it has been rumoured that Pala proposed merging Barminco with Dumas Mining Services, a Canadian mining contractor company in which Pala has a controlling interest. Although Barminco rejected the proposal at the time, the company is currently faced with AUD $356.5 million worth of bank debt that is set to mature in February It is reported that the board has been in recent discussions to refinance this debt. It has been rumoured in a number of media sources, including the Australian Financial Review and the Wall Street Journal, that ASX-listed BHP Billiton could sell a minority stake in the Olympic Dam project to help fund the project s expansion. The Wall Street Journal reported that BHP s board is due to decide on the expansion of Olympic Dam by the end of However, the escalating costs and slumping commodities prices may impact the project s progress. The report further noted that Deutsche Bank analysts believe a solution to this is for BHP to raise USD$6 billion by selling 20% of its stake in the project. It has also been speculated that buyers could include Chinese or South Korean utilities or Japanese trading houses. After obtaining Queensland state approval for its proposed rail route, India s Adani Enterprises Ltd is reported in various media sources, including Reuters and Money Control, to be PAGE 1

3 looking for partners to help fund its USD$2 billion coal rail line from Queensland s Galilee Basin (Galilee Basin project). The Galilee Basin project is expected to begin production by January Although Adani Enterprises has declined to name potential partners, other companies with projects in the Galilee Basin (near Adani s Carmichael coal project) include Brazil s Vale and China s Macmines Austasia. In related news, The Economic Times has reported that Adani Group is looking to raise AUD$1 billion by June 2013 by selling a 2.5% stake in Adani Ports and divesting a 5% interest in Adani Enterprises to fund the Galilee Basin project. Regulatory Updates Greentape Reduction for Environmental Approvals On 29 May 2012, the Environmental Protection (Greentape Reduction) and Other Legislation Amendment Bill 2012 (Qld) received its second reading speech in the Legislative Assembly. The Bill introduces an automatic approval process for certain business activities, streamlines mining approval process and related information requirements. The Bill is part of the Queensland Government s aim to streamline the approval process for environmental authorities, which is expected to save time and approximately AUD$11.7 million per year for businesses. Full implementation of the new approval process is expected in March In related news, the Queensland Natural Resources and Mines Minister, Andrew Cripps, declared that the Queensland Government is committed to expanding the resources sector by fast-tracking approval times for major projects and restoring regulatory certainty. In a recent Committee for the Economic Development of Australia lunch, the Minister revealed that the Queensland Government is currently drafting laws to make it easier for industry participants to seek tenure and to speed up assessment of applications. For further information about Greentape Reduction, visit: greentape/index.html Mining buffer zones in Queensland Queensland Natural Resources and Mines Minister Andrew Cripps recently stated that the mining buffer zones in Queensland are subject to change, but would stay in place until new strategic regional plans are implemented. Currently, there is a 2km buffer zone around towns of more than 1000 people within which no new exploration permits may be granted. The government is looking to replacing this rigid rule with regional plans that may change the buffer zones according to the area and the local issues. For example, areas that the Queensland Government prioritises for protection, such as the Darling Downs, the Scenic Rim and the Golden Triangle, may have larger buffer zones due to public interest. Minerals and Petroleum Investment Fund The New South Wales Government has imposed an annual rental fee and administrative levy under the Mining Act 1992 (NSW), which must be paid by holders of mining authorisations. The new fee and levy are set to commence on 1 July With a minimum fee of $100, the annual rental fee ranges from AUD$20 per square kilometre to AUD$2,400 per square kilometre, depending on the type of mining authorisation held. For authorisations granted before 1 July 2012, the annual rental fee will be payable on each grant anniversary date that occurs on or after 1 July The amount payable will be calculated in accordance with the information on the current records kept at the New South Wales Department of Industry and Investment (the Department). For authorisations granted on or after 1 July 2012, the initial annual rental fee must be paid before authorisation is granted. After the grant, the annual rental fee is due on each grant anniversary date. The annual administrative levy is one percent of the security deposit amount. The Department may require a security deposit in relation to a mining authorisation. The minimum security deposit that can be required for small-scale titles is AUD$1000 and the minimum security deposit for all other authorisations is AUD$10,000. If no security deposit is required, an administrative levy of $100 is payable. For authorisations granted before 1 July 2012, the levy will be payable on each grant anniversary date that occurs on or after 1 July For authorisations granted on or after 1 July 2012, the initial levy must be paid before authorisation is granted. After the grant, the levy is due on each grant anniversary date. PAGE 2

4 Other news MRRT Constitutional Challenge On 22 June 2012, ASX-listed Fortescue Metals Group Ltd lodged a challenge in the High Court of Australia against the constitutional validity of the Federal Government s Minerals Resources Rent Tax (MRRT). 2 The MRRT imposes a headline rate of 30% on iron ore and coal projects, with a 25% extraction allowance which reduces the rate to 22.5%. The tax is set to commence on 1 July More details on the MRRT are available in the April edition of the Australian Resources Sector Update. New Rail Corridors for Queensland The Queensland Government has announced that two new rail corridors will be implemented to service coal mines in both the Galilee and Bowen Basins. An east-west corridor will be extended to provide links to the Abbot Point, Dalrymple Bay and Dudgeon Point coal terminals. The extension is currently being developed by QRN and Adani. A north-south rail corridor will be constructed along the proposed GVK/ Hancock alignment to integrate mining operations in the southern Galilee Basin and Abbot Point. The Deputy Premier, Jeff Seeney, has also expressed that there will be an option for other large mining proposals to co-locate their own new railway lines within the north-south corridor. Federal Oversight of Approvals The Queensland and Federal Governments signed a new bilateral agreement on 14 June 2012 to allow Queensland to assess new projects under Commonwealth environmental laws. Future project developments will be assessed under the new bilateral agreement and will be given defined milestones and timeframes for providing documents, feedback and approvals. This new agreement is intended to avoid the reoccurrence of the Alpha project approval dispute between the two levels of government. Queensland Land Access Law under Review Recently, the Queensland Government s Land Access Review Panel released a review report on the Land Access Framework which was implemented 12 months ago in response to the persistent issue of private land access disputes. Amongst other things, the framework introduced the Land Access Code, which all resource authority holders must comply with. As a part of the review, the Land Access Review Panel made 12 recommendations, including an obligation on the Queensland Government to notify all landholders covered by the tenement at the time that the tenement is granted, and the implementation of a mechanism to help landholders and resources companies to develop a detailed work plan setting out both parties activities on the land. The Queensland Government is currently considering the 12 recommendations. Funding Commitment in Western Australia The Department of Mines and Petroleum has announced that the Western Australian Government has committed $37.5 million to Phase 2 of the Exploration Incentive Scheme (EIS) as part of its Budget. According to the Western Australian Government, Phase 1 of the EIS was highly successful. The further investment by the Western Australian Government is targeted at enhancing the take-up of greenfields acreage so that new minerals can be discovered in more remote and regional areas. The initial investment attracted projects in the Eucla region, enabled the first remote greenfields uranium discovery in 30 years and allowed the Mount Magnet mine to be reopened. 2 Corrs is advising Fortescue Metals Group Ltd in this litigation. PAGE 3

5 contacts Bruce Adkins Tel Mob bruce.adkins@corrs.com.au Peter Jarosek Partner, Perth Tel Mob peter.jarosek@corrs.com.au John Kelly Tel Mob john.kelly@corrs.com.au Russell Philip Partner, Perth Tel Mob russell.philip@corrs.com.au Michael MacGinley Tel Mob michael.macginley@corrs.com.au Tighe Whelan Senior Associate, Perth Tel Mob tighe.whelan@corrs.com.au Andrew Chew Tel Mob andrew.chew@corrs.com.au Clare Corke Partner, Melbourne Tel Mob clare.corke@corrs.com.au Michael Harrison Tel Mob michael.harrison@corrs.com.au Lizzie Knight Special Counsel, Melbourne Tel lizzie.knight@corrs.com.au Andrew Lumsden Tel Mob andrew.lumsden@corrs.com.au DISCLAIMER The contents of this document are provided solely for information purposes. This document has been compiled using publicly available information from sources including newspapers, the websites of companies listed in this document and other publicly disclosed documents prepared by those companies. In some instances, references to the source documents relied upon in preparing this document have been provided in the footnotes. Although we have taken care in compiling this document, we do not in any way warrant that the information contained in this document is accurate, complete or correct and do not assume any responsibility or liability for that information. We do not make any recommendation that you should invest in any of the companies listed in this document. If any person intends to invest in one or more of the companies referred to in this document, they should first undertake, among other things, financial, tax, technical, engineering, geological and legal due diligence on the company or project (and the company s or project s assets) before making that investment. PAGE 4