Asian buyers in spate of Australian deals

The Business of Mining - thebusinessofmining.com | July 6, 2010 | 7:53 am Energy Coal 

“A spate of cross-border acquisitions in Australia’s mining and energy sectors was announced on Monday partly in response to the new government’s revised minerals tax and also because of China’s continuing thirst for commodities.

Leading bankers and fund managers forecast a dramatic rebound in takeover activity, saying the resolution of the tax dispute between miners and the government will trigger further overseas investment in Australian mining and energy assets.”

Banpu, Thailand’s biggest coal producer, on Monday launched a A$2.5bn ($2.1bn) takeover bid for Centennial Coal, a thermal coal producer. Its offer of A$6.20 a share for the 80 per cent of Centennial it did not already own was at a 40 per cent premium to Centennial’s pre-bid trading levels.

Source: Financial Times, July 5 2010

Observations:

  • The super profit tax proposal by Kevin Rudd has been significantly changed. Changes will only occur for iron ore and coal operations and effective rate increase is much lower than originally proposed.
  • Banpu has reacted swiftly to the increased certainty about feasibility of projects by bidding to acquire all shares of Centennial. Analysts expect the offer to succeed.

Implications:

  • Banpu was only producing coal in Thailand and Indonesia until now. The step towards production in Australia emphasizes the growing influence of “Eastern” miners in the developed mining areas.
  • Other companies have restarted development projects in Australia as business goes “back to normal”. However, especially for the large iron ore projects in Western Australia project economics will be significantly less comforting than in the “old” tax regime.

©2010 – thebusinessofmining.com

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