Mining Projects on Hold; Australian Dollar Rises

Mayank Mehta, Chandrasekhar Atreya and Darlington Musarurwa
10 May, 2010
New York City

Stocks rise and dollar gains in Australia as European lenders agree to a larger bailout package for the debt crisis in Europe. Australian job ads drop 1.2% in April. Australian business confidence declines by 3 to 13 points in April. Peabody revises Macarthur takeover offer to A$3.8 billion.

[R]3:00 AM New York, 7:00 PM Sydney – Stocks rise and dollar gain in Australia as European lenders agree to a larger bailout package for the debt crisis in Europe. Australian job ads drop 1.2% in April. Australian business confidence declines by 3 to 13 points in April. Peabody revises Macarthur takeover offer to A$3.8 billion.[/R]

Australian and New Zealand dollars strengthened against the greenback and the yen and stocks rose 2.7% after demand for riskier assets got a boost as European lenders agreed on a near $1 trillion loan package to contain the region’s debt crisis.

Investors particularly cheered the news the European Central Bank will be buying euro government and private bonds.

The 16 euro nations agreed to a loan package of $973 billion to counter severe tensions in markets like Greece, Portugal and Spain by buying private and government debt.

However, gains were limited as job ads dropped and business confidence fell in April, according to separate private reports.

The business confidence index slipped 3 points from March to 13 according to a survey of more than 400 companies done by the National Australian Bank Ltd between April 23 and April 30 and released in Sydney today.

A separate report by Australia and New Zealand Banking Group Ltd shows that job vacancies advertised in newspapers and the Internet fell by 1.2% from March.

Peabody Energy Corp, the biggest US coal producer modified its acquisition offer of Macarthur Coal Ltd downwards to A$3.8 billion a clear sign that 40% tax on mining profits has dampened the investment climate.

The US firm made the revised offer of A$15 a share from A$16 a share after studying the finances of Macarthur Coal Ltd after the new tax was announced, the St Louis-based company said in a statement today.

The Macarthur board is meeting to consider the new proposal, spokesman Alasdair Jeffrey said.

The Transurban Group, which owns toll-roads in US and Australia, will buy the Lane Cove Tunnel of Sydney for A$630.5 million paying part of it through a A$542.3 million equity sale, the Melbourne-based company said in a statement today.

In Sydney trading ASX 200 Index rose 2.7% or 119.1 to 4,599.80.

Of the ASX 200 index shares, 163 gained, 26 fell, and 11 were unchanged. Murchison Metals led gainers in the index shares with a rise of 11.8% followed by Kagara Ltd. increasing 10.2%.

The Australian dollar gained 2% to 90.56 U.S. cents.

Australian Job Ads Fall 1.2% in April

The ANZ Job Advertisements Series shows the total number of jobs advertised in major metropolitan newspapers and on the internet dropped 1.2% to an average of 160,660 per week, falling for the first time since January.

However job ads remained 14.9% higher than the same period a year ago.

Job advertisements in major metropolitan newspapers decreased 0.7% in April, but were 17.6% higher than a year earlier.

The report notes that newspaper job advertisements improved in April in the Northern Territory, Queensland and the ACT, but fell elsewhere.

In addition, internet job advertisements fell by 1.3% in April, the first monthly fall since January.

ANZ chief economist Warren Hogan said the marginal drop in job ads was because of the two rate hikes by the Reserve Bank of Australia.

Australian Business Confidence Falls in April

National Australia Bank reported today that the country’s business confidence fell 3 points to 13 points in April, dropping for the second straight month.

Business conditions dropped 5 points to 8 and capacity utilization eased to 82 % in the review period from 82.1% in March.

Forward orders declined markedly while trading, employment and profitability also fell.

Peabody Revises Macarthur Bid to A$3.8 billion

Macarthur Coal reported today that U.S. firm Peabody has lowered its takeover offer from A$16 for every share to A$15, valuing the company at A$3.8 billion, after government proposed a 40% tax on super profits.

The review comes in the wake of a due diligence exercise carried out by the company.

Peabody is still willing to provide any or all of Macarthur’s three major shareholders- CITIC, ArcelorMittal and POSCO - the opportunity to retain their economic interest in Macarthur should they choose to do so.

The proposed scheme of arrangement will require the approval of 75% of shares voted and 50% of shareholders voting at a scheme meeting.

Gainers & Losers

Murchison Metals led gainers in the ASX 200 index stocks with a rise of 11.8% followed by Kagara Ltd. 10.2%, Cudeco Ltd. 10.1%, Gindalbie Metals 10.1%, and Panoramic Resources 10%.

Ardent Leisure led decliners in the ASX 200 index shares with a fall of 5.6% followed by Emeco Holdings 2.5%, Macarthur Coal 2.3%, Medusa Mining 2.2%, and Toll Holdings 2.2%.