FEBRUARY 2011 1 ASX RESOURCES - GROUP 150 We are pleased to present the February edition of ‘Group 150’, a ranking of the top 150 ASX listed resources companies (excluding oil and gas), by market capitalisation. January recorded the first decline in cumulative market value of the Group 150 since August 2010, down 2.8% for the month to $589.2 billion from $606.3 billion. The entry point into the Group 150 also fell during January to $127.7 million from $132.8 for December. The ASX/S&P 200 Resources Index dropped 3.1% for the month, while the ASX All Ordinaries and ASX/S&P 200 Index increased 0.1% and 0.2% respectively. Given the recent holiday season, limited M&A activity was recorded during the month with only one transaction announced - Regent Pacific’s offer for BC Iron. Only one third of the Group 150 experienced an increase in market value during the month with the “winners” being: Peninsula (+33.4%), Elemental (+32.1%), Carabella (+28.9%), Flinders (+26.7%) and Bathurst (+26.5%). In this edition of Group 150, we have provided a case study on Rio Tinto-Zinc Corporation (RTZ) and how they utilised the capital market to fund growth while retaining effective control. RTZ was created as a result of a merger between British owned The Rio Tinto Company and The Consolidated Zinc Corporation, an Australian company. Over time RTZ created a number of listed businesses in different equity markets where each business was able to tap the local equity markets and pursue rapid growth. All the time RTZ retained effective control. RTZ effectively utilised a “Hunting Pack” strategy to create a world class business in CRA. Although many CRA business units (copper, coal, industrial minerals) were in fact competitors to RTZ business units the over-riding strategy seemed to be that commodity businesses really competed on an operating cost level. At the appropriate time, after CRA’s growth had been funded by the equity capital markets, the company was once again brought back into the RTZ corporate centre via the dual listed mechanism. • Diamonds (Argyle) • Aluminium (Comalco (67%) - Gladstone refinery, Weipa bauxite) • Dampier salt • Hamersley Iron • Pacific Coal (Blair Athol, Tarong, Hail Creek) • Kaltim Prima (50%) - sold 2003 • Century - sold 1997 • Coal and Allied We look forward to seeing you at Indaba next week. Gresham Advisory Partners Limited GROUP 150 February 2011 Edition 11 Darren Martin Gresham Advisory Partners [email protected]+61 8 9486 7077 +61 412 144 719 Gresham Advisory Partners is a leading Australian mergers and acquisitions/corporate advisory business and one of Australia’s largest and highest ranking independent corporate advisors.
Transcript
FEBRUARY 2011
1
ASX RESOURCES - GROUP 150We are pleased to present the February edition of ‘Group 150’, a ranking of the top 150 ASX listed resources companies (excluding oil and gas), by market capitalisation. January recorded the first decline in cumulative market value of the Group 150 since August 2010, down 2.8% for the month to $589.2 billion from $606.3 billion. The entry point into the Group 150 also fell during January to $127.7 million from $132.8 for December. The ASX/S&P 200 Resources Index dropped 3.1% for the month, while the ASX All Ordinaries and ASX/S&P 200 Index increased 0.1% and 0.2% respectively. Given the recent holiday season, limited M&A activity was recorded during the month with only one transaction announced - Regent Pacific’s offer for BC Iron.Only one third of the Group 150 experienced an increase in market value during the month with the “winners” being: Peninsula (+33.4%), Elemental (+32.1%), Carabella (+28.9%), Flinders (+26.7%) and Bathurst (+26.5%). In this edition of Group 150, we have provided a case study on Rio Tinto-Zinc Corporation (RTZ) and how they utilised the capital market to fund growth while retaining effective control.RTZ was created as a result of a merger between British owned The Rio Tinto Company and The Consolidated Zinc Corporation, an Australian company. Over time RTZ created a number of listed businesses in different equity markets where each business was able to tap the local equity markets and pursue rapid growth. All the time RTZ retained effective control. RTZ effectively utilised a “Hunting Pack” strategy to create a world class business in CRA. Although many CRA business units (copper, coal, industrial minerals) were in fact competitors to RTZ business units the over-riding strategy seemed to be that commodity businesses really competed on an operating cost level. At the appropriate time, after CRA’s growth had been funded by the equity capital markets, the company was once again brought back into the RTZ corporate centre via the dual listed mechanism.• Diamonds (Argyle)• Aluminium (Comalco (67%) - Gladstone refinery, Weipa bauxite)• Dampier salt• Hamersley Iron• Pacific Coal (Blair Athol, Tarong, Hail Creek)• Kaltim Prima (50%) - sold 2003• Century - sold 1997• Coal and Allied We look forward to seeing you at Indaba next week.
Gresham Advisory Partners is a leading Australian mergers and acquisitions/corporate advisory business and one of Australia’s largest and highest ranking independent corporate advisors.
Top 150 ASX LiSTed reSource compAnieS - JAnuAryBy Market Capitalisation
Group 150
2
Mkt Cap (A$m) % Mkt Cap (A$m) %
Jan Dec Company 31-jan-11 31-Dec-10 Change Jan Dec Company 31-Jan-11 31-Dec-10 Change
Group 150 LeAderS And LAGGerS - mArkeT cApiTALiSATion performAnce - JAnuAryLeaders
Laggers
Source: Capital IQ
* Included placement, acquisition and/or material option conversion during month
Citadel Resource Group Limited (ASX:CGG)Morning Star Gold NL (ASX:MCO)Reed Resources Ltd. (ASX:RDR)Resource and Investment NL (ASX:RNI)Uranex NL (ASX:UNX)Legend Mining Ltd. (ASX:LEG)
Group 150
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Group 150 SecTor mArkeT cApiTALiSATion - JAnuAry
merGer & AcquiSiTionS - Announced in JAnuAry
Date Announced Target Acquirer Value
(A$m)
Percent Sought
(%)
Premium - 1 Day Prior
(%)
Premium - 1 Month Prior
(%)
Consideration Offered
20-Jan-2011 BC Iron Limited (ASX:BCI) Regent Pacific Group Ltd (SEHK:575) 258.7 80.13 4.1 27.9 Cash
Source: Capital IQ Announced Australian Resources (excluding oil and gas) Mergers and Acquisitions >A$10m
Group 150 mArkeT cApiTALiSATion
ASX indeX performAnce - JAnuAry
Mar
ket C
apit
alis
atio
n (A
$b)
FEBRUARY 2011
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rio TinTo - cASe STudy
Utilising capital markets to fund growth while retaining effective control.
RTZ was created as a result of a merger between British owned The Rio Tinto Company and The Consolidated Zinc Corporation, an Australian company. RTZ created a number of listed businesses in different equity markets where each business was able to tap the local equity markets and pursue rapid growth. All the time RTZ retained effective control. RTZ effectively utilised a “Hunting Pack” strategy to create a world class business in CRA. Although many CRA business units (copper, coal, industrial minerals) were in fact competitors to RTZ business units the over-riding strategy seemed to be that commodity businesses really competed on an operating cost level. At the appropriate time, after CRA’s growth had been funded by the equity capital markets, the company was once again brought back into the RTZ corporate centre via the dual listed mechanism.• Diamonds (Argyle)• Aluminium (Comalco (67%) - Gladstone refinery, Weipa bauxite)• Dampier salt• Hamersley Iron• Pacific Coal (Blair Athol, Tarong, Hail Creek)• Kaltim Prima (50%) - sold 2003• Century - sold 1997• Coal and Allied
In the early stages, Rio Tinto built its copper portfolio by tapping local capital markets to develop projects.
1956
• Palabora Mining Company is founded
1963
• Palabora listed on JSE, with Rio Tinto as a major sharehold-er. Construction commences
• Bougainville Copper Pty Ltd, a JV between Conzinc Rio Tinto (CRA) & Broken Hill Corp. began prospecting
1964
• Mining operations commence at Palabora
1967
• Bougainville Copper Pty Ltd is incorporated
1971
• Bougainville Copper Ltd listed on ASX (Rio Tinto 53.9%)
Palabora Mining Company
In the early 1990’s a copper deposit was identified in South Africa. In 1956, the Palabora Mining Company (“Palabora”) was formed to develop the mine
In 1963, Palabora listed on the Johannesburg Stock Exchange (“JSE”) to raise capital to find construction of the mine. Rio Tinto was a major shareholder. Mining operations commenced at Palabora in 1964
In 1996, Palabora commenced the construction of an underground mine, timed to reach full production in 2002 as the open pit mine reached the end of its life
Rio Tinto retains a 57% interest in the company and manages the mine, smelter and refinery.
Bougainville Copper Limited
A large copper porphyry deposit was discovered on the island of Bougainville, Papua New Guinea, in the mid-1960’s by CRA Exploration Ltd (now Rio Tinto)
In 1967, Bougainville Copper Pty Ltd (“BCL”) was incorporated for the purpose of developing and mining this deposit
In 1971, BCL listed on the Australian Stock Exchange with Rio Tinto as a 53.6% shareholder
From 1972 to 1989, BCL mined the Panguna deposit. However, mining operations were suspended in 1989 due to civil unrest in Bougainville
Group 150
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rio TinTo - cASe STudy
Rio Tinto subsequently acquired interests in several other copper assets
1985
• RTZ acquired 49% of Neves Corvo
• 30% interest in Escondida acquired by RTZ
1989
• Kennecott Copper acquired from BP
• Commercial prod’n achieved at Neves Corvo
• Mining ceased at Bougainville Copper
1995
• RTZ Corporation Plc mergers with CRA Ltd to form the DLC, Rio Tinto Plc and Rio Tinto Ltd
• Rio Tinto acquires 12% interest in FCX & 40% JV interest on future expansions at Grasberg
2000
• Rio Tinto acquires North Ltd, including:
• 25% interest in Alumbrera
• 80% interest in Northparkes
2006
• Acquired 9.9% in Ivanhoe Mines
• Subsequent events have lifted this to the current interest of 40.3%
Acquisition of project interests
In the 1980’s, Rio Tinto acquired interests in several copper projects including:
• a 49% interest in Somincor, the operator of Neves Corvo in 1985
• a 30% joint venture interest in the Escondida project in 1985
• a 100% interest in Kennecott Copper, acquired from British Petroleum when they divested their minerals portfolio in 1989
Investment in a listed company
In 1995 Rio Tinto acquired a 12% interest in Freeport-McMoran Copper & Gold (“FCX”). In 2004 FCX acquired these shares for cash
In 2006 Rio Tinto acquired a holding of 9.9 per cent in Ivanhoe Mines which was increased by a further 9.9% in October 2009. Subsequent convertible funding has increased this interest to 40.3% of Ivanhoe Mines
Joint venture agreements
In addition to acquiring FCX shares, Rio Tinto signed a joint venture agreement with FCX entitling Rio Tinto to 40% of any future expansions at the Grasberg mine in Indonesia. Rio Tinto’s share of production from this joint venture arrangement was close to 108,000t copper in 2009
Acquisition of North Ltd
Through its acquisition in 2000 of North Ltd, Rio Tinto gained a 25% interest in the Alumbrera copper-gold project and an 80% interest in Northparkes
At the same time, Rio Tinto has divested unwanted copper assets
1992
• RTZ disposes interest in Rio Algom
• CRA sells Cobar Mines Pty Ltd
2000
• Rio Tinto sells an 80% interest in Sepon project to Oxiana Resources NL
Rio Algom
Rio Algom was originally the Canadian arm of RTZ, formed after the acquisition of several Canadian uranium mines in 1955
Rio Algom subsequently developed interests in copper (Cerro Colorado, Highland Valley), molybdenum, uranium, potash and coal
In 1992, RTZ sold its 51.5% stake in Rio Algom for £118M, citing that it was to avoid competition with other North American interests such as its Kennecott operations
Cobar
CRA acquired Cobar Mines Pty Ltd (“Cobar”) in 1980 when Broken Hill South Ltd was dismembered
CRA operated the mine until December 1992 when it sold Cobar to Golden Shamrock Mines Ltd (80.5%), Pacific Highway Pty Ltd and former management
Sepon
In December 1990 CRA Exploration (Laos) Limited successfully negotiated a Mining Exploration & Production Agreement (“MEPA”) with the Government of Laos, covering a 5,000km2 area near the town of Sepon
Exploration commenced in 1993. By 1999 an internal Rio Tinto review indicated that the project was unlikely to meet corporate size criteria and the project was offered for sale
In August 2000 Oxiana Resources NL acquired an 80% interest in the Sepon project from Rio TintoSource: Gresham, RJMcDonald, Company Websites
FEBRUARY 2011
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Share Price Performance - January 2011
Share Price Performance - Since 30 June 2010
52 Week Hi / Low / Current
BASe meTALS - SecTor performAnce
Shar
e Pric
e Per
form
ance
Shar
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e Per
form
ance
Shar
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e Per
form
ance
Copper Nickel Zinc
Group 150
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Share Price Performance - January 2011
Share Price Performance - Since 30 June 2010
52 Week Hi / Low / Current
coAL - SecTor performAnce
Shar
e Pric
e Per
form
ance
Shar
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e Per
form
ance
Shar
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form
ance
FEBRUARY 2011
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Share Price Performance - January 2011
Share Price Performance - Since 30 June 2010
52 Week Hi / Low / Current
diverSified - SecTor performAnce
Shar
e Pric
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form
ance
Shar
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form
ance
Shar
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induSTriAL minerALS - SecTor performAnce
Shar
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form
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form
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Shar
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form
ance
Group 150
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Share Price Performance - January 2011
Share Price Performance - Since 30 June 2010
52 Week Hi / Low / Current
GoLd - SecTor performAnce
Shar
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form
ance
Shar
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form
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Shar
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form
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FEBRUARY 2011
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Share Price Performance - January 2011
Share Price Performance - Since 30 June 2010
52 Week Hi / Low / Current
iron ore - SecTor performAnce
Shar
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form
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Shar
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e Per
form
ance
Shar
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form
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Group 150
12
Share Price Performance - January 2011
Share Price Performance - Since 30 June 2010
52 Week Hi / Low / Current
urAnium - SecTor performAnce
Shar
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e Per
form
ance
Shar
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form
ance
Shar
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form
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FEBRUARY 2011
13
conSenSuS commodiTy price forecASTS - JAnuAry
Source: Bloomberg Consensus Estimates - Median / High / Low
Terms and ConditionsInformation contained in this publicationThe opinions, advice, recommendations and other information contained in this publication, whether express or implied, are published or made by Gresham Advisory Partners Limited (ABN 88 093 611 413), Australian financial services license (247113), and by its officers and employees (collectively “Gresham Advisory Partners”) in good faith in relation to the facts known to it at the time of preparation. Gresham Advisory Partners has prepared this publication without consideration of the investment objectives, financial situation or particular needs of any individual investor, and you should not rely on the publication for the purpose of making a financial decision. To whom this information is providedThis publication is only made available to persons who are wholesale clients within the meaning of section 761G of the Corporations Act 2001. This publication is supplied on the condition that it is not passed on to any person who is a retail client within the meaning of section 761G of the Corporations Act 2001.Disclaimer and limitation of liabilityTo the maximum extent permitted by law, Gresham Advisory Partners will not be liable in any way for any loss or damage suffered by you through use or reliance on this information. Gresham Advisory Partners’ liability for negligence, breach of contract or contravention of any law, which cannot be lawfully excluded, is limited, at Gresham Advisory Partners’ option and to the maximum extent permitted by law, to resupplying this information or any part of it to you, or to paying for the resupply of this information or any part of it to you.No warranties made as to contentGresham Advisory Partners makes no warranty, express or implied, concerning this publication. The publication provided by us on an “AS IS” basis at your sole risk. Gresham Advisory Partners expressly disclaims, to the maximum extent permitted by law, any implied warranty of merchant-ability or fitness for a particular purpose, including any warranty for the use or the results of the use of the publication with respect to its correctness, quality, accuracy, completeness, or reliability.CopyrightCopyright in this publication is owned by Gresham Advisory Partners. You may use the information in this publication for your own personal use, but you must not (without Gresham Advisory Partners’ consent) alter, reproduce or distribute any part of this publication, transmit it to any other person or incorporate the information into any other document.General mattersThese Terms and Conditions are governed by the law in force in the State of Victoria, and the parties irrevocably submit to the non-exclusive jurisdiction of the courts of Victoria and courts of appeal from them for determining any disputes concerning the Terms and Conditions.If the whole or any part of a provision of these Terms and Conditions are void, unenforceable or illegal in a jurisdiction it is severed for that jurisdiction. The remainder of the Terms and Conditions have full force and effect and the validity or enforceability of that provision in any other jurisdiction is not affected. This clause has no effect if the severance alters the basic nature of the Terms and Conditions or is contrary to public policy.If Gresham Advisory Partners do not act in relation to a breach by you of these Terms and Conditions, this does not waive Gresham Advisory Partners’ right to act with respect to subsequent or similar breaches.
Advised BHP Billiton on its
$204m offer for United Minerals
Corporation.
Advised BG Group on its $1bn takeover offer for
Pure Energy Resources Limited.
Advised IAMGOLD Corporation on its $265m acquisition
of Gallery Gold.
Advised Gem Diamonds on its
$300m acquisition of Kimberley Diamonds.
Advised Polaris Metals NL on
$178m takeover offer by Mineral
Resources Limited.
Advised Tethyan on its $220m
competing takeover offer by Crosby and Antogafasta/Barrick.
Advised Iluka on its $114m
institutional placement and
$353m accelerated right issue.
Advised Bannerman
Resources on its financing with
Resource Capital Funds.
Advised Iluka Resources on its
$54m Narama coal divestment to
Xstrata.
Advised Murchison Metals
on its joint venture with Mitsubishi.
2010
2010
Advised BHP Billiton on its
US$116bn iron ore production
joint venture with Rio Tinto.
2010
Introduced Denham Capital to
Trans Tasman Resources resulting
in NZ iron sands investment.
2010
2009
Advised Indophil on $545m
recommended offer from Zijin
2010
Advised BHP Billiton on the disposal of the Yabulu Nickel
refinery.
2009
Advised Allied Gold on its $54m
acquisition of Australian
Solomons Gold.
2009
Advised Brandrill Limited on its
$45m takeover offer by Ausdrill
Limited.
2009
2008
Advised Kalahari Minerals on its
$140m proposed merger with
Extract Resources.
2008
Advised Centaurus
Resources on its $20m merger
with Glengarry Resources.
2010
2009/08
2008
Advised Summit Resources on its
A$1.2bn takeover by Paladin Energy.
2007
2008
2006
2007
2008
Advised Guandong Rising on its $216m
cornerstone investment in Pan
Aust.
GRAM2009
Advised Energy Metals on its $86m
proportional takeover offer by China
Guangdong Nuclear Power Group.
2009
Mergers and Acquisitions
Takeover Defence
Strategic Advisory, Joint Ventures and Capital Markets
recenT reSourceS TrAnSAcTionS
Takeover Defence
Strategic Advisory, Joint Ventures and Capital Markets
