MARCH 2011 1 ASX RESOURCES - GROUP 150 We are pleased to present the March edition of ‘Group 150’, a ranking of the top 150 ASX listed resources companies (excluding oil and gas), by market capitalisation. February recorded the Group 150 recapture of the decline in cumulative market value witnessed in January, up 2.8% to 605.4 billion. The entry point into the Group 150 was extended in February to $138.1 million from $127.7 million for January. The ASX/ S&P 200 Resources Index increased 3.4% for the month, significantly outperforming both the ASX All Ordinaries and ASX/S&P 200 Index which increased 1.5% and 1.6% respectively. Four M&A transactions were announced during the month with base metals being the current focus, supported by Independence’s offer for Jabiru and Equinox’s offer for Lundin Mining. Following the upbeat and positive predictions made at Indaba, we expect to see an increased level of activity in the coming months. A straw poll amongst some of the 5,000 delegates appeared to favour gold, iron ore and copper as the preferred commodities. “Winners” for February (in terms of growth in market capitalisation) were : Cobar (+76.4%), Atlas Iron (+72.5%), South Boulder (+72.1%), Papillon (+61.1%) and Carabella (+48.9%). In this edition, we provide the results of our study on the current gearing levels of the Group 150 companies. Capital structuring and, in particular, locating the optimal capital structure, have for a long time been a focus for many an academic and financial institution that probe this area. In recent years, the role of financial management has undergone a significant change. The ownership structure, size of companies, equity / debt markets, financial systems and instruments have advanced significantly in a technology driven dynamic environment. As a result, the role of management has become far more important than merely a fund raiser. Management is expected to maximize the economic welfare of the owners, represented by the market value of the firm and faces competition from interests seeking short term share price appreciation versus long term growth. To achieve this objective, one has to take a number of decisions, the most important being the investment, financing and dividend decisions. Testing the thesis “cash is king and debt is bad” we observed 80% of the Group 150 were in a net cash position at 31 December 2010 and the weighted average gearing level was negative 2.6%, when measured on a net debt to enterprise value basis. Interestingly, companies with a domestic focus are in a stronger net cash position than peers with overseas focussed operations. We look forward to seeing you at Mines and Money in Hong Kong at the end of the month. Gresham Advisory Partners Limited GRESHAM GROUP 150 March 2011 Edition 12 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.
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MARCH 2011
1
ASX RESOURCES - GROUP 150We are pleased to present the March edition of ‘Group 150’, a ranking of the top 150 ASX listed resources companies (excluding oil and gas), by market capitalisation.
February recorded the Group 150 recapture of the decline in cumulative market value witnessed in January, up 2.8% to 605.4 billion. The entry point into the Group 150 was extended in February to $138.1 million from $127.7 million for January. The ASX/S&P 200 Resources Index increased 3.4% for the month, significantly outperforming both the ASX All Ordinaries and ASX/S&P 200 Index which increased 1.5% and 1.6% respectively.
Four M&A transactions were announced during the month with base metals being the current focus, supported by Independence’s offer for Jabiru and Equinox’s offer for Lundin Mining. Following the upbeat and positive predictions made at Indaba, we expect to see an increased level of activity in the coming months. A straw poll amongst some of the 5,000 delegates appeared to favour gold, iron ore and copper as the preferred commodities.
“Winners” for February (in terms of growth in market capitalisation) were : Cobar (+76.4%), Atlas Iron (+72.5%), South Boulder (+72.1%), Papillon (+61.1%) and Carabella (+48.9%).
In this edition, we provide the results of our study on the current gearing levels of the Group 150 companies.
Capital structuring and, in particular, locating the optimal capital structure, have for a long time been a focus for many an academic and financial institution that probe this area. In recent years, the role of financial management has undergone a significant change. The ownership structure, size of companies, equity / debt markets, financial systems and instruments have advanced significantly in a technology driven dynamic environment. As a result, the role of management has become far more important than merely a fund raiser.
Management is expected to maximize the economic welfare of the owners, represented by the market value of the firm and faces competition from interests seeking short term share price appreciation versus long term growth. To achieve this objective, one has to take a number of decisions, the most important being the investment, financing and dividend decisions.
Testing the thesis “cash is king and debt is bad” we observed 80% of the Group 150 were in a net cash position at 31 December 2010 and the weighted average gearing level was negative 2.6%, when measured on a net debt to enterprise value basis. Interestingly, companies with a domestic focus are in a stronger net cash position than peers with overseas focussed operations.
We look forward to seeing you at Mines and Money in Hong Kong at the end of the month.
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 - FebruaryBy Market Capitalisation
Group 150
2
Mkt Cap (A$m) % Mkt Cap (A$m) %
Feb Jan Company 28-Feb-11 31-Jan-11 Change Feb Jan Company 28-Feb-11 31-Jan-11 Change
20-Jan-2011 BC Iron Limited (ASX:BCI) Regent Pacific Group Ltd (SEHK:575) 258.7 80.13 4.1 27.9 Equity
Source: Capital IQ Announced Australian Resources (excluding oil and gas) Mergers and Acquisitions >A$10m
Group 150 markeT capiTaLisaTion
asX indeX perFormance - February
Mar
ket C
apit
alis
atio
n (A
$b)
MARCH 2011
5
NET DEBT
NET CASH
capiTaL sTucTure - GearinG LeveLs
Optimising Capital Structure to Improve Shareholder Value
Capital structuring and, in particular, locating the optimal capital structure, have for a long time been a focus for many an academic and financial institution that probe this area. Academically, the problem is appealing because it is fairly open ended and subject to controversies and criticisms.
In recent years, the role of financial management has undergone a significant change. The ownership structure, size of companies, equity / debt markets, financial systems and instruments have advanced significantly in a technology driven dynamic environment. As a result, the role of management has become far more important than merely a fund raiser.
Management is expected to maximize the economic welfare of the owners, represented by the market value of the firm and faces competition from interests seeking short term share price appreciation versus long term growth. To achieve this objective, one has to take a number of decisions, the most important being the investment, financing and dividend decisions.
Below is a summary of the gearing levels of the Group 150. As at 31 December 2010, 80% of companies were in a net cash position, with the weighted average gearing level being negative 2.6%. Interestingly, companies with a domestic focus are in a stronger net cash position than peers with overseas focussed operations.
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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
