Australian Stocks Slip, Queensland Rail IPO

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

There is room for negotiation in the 40% proposed super profit mine tax. BHP says new tax makes Australia less competitive. Queensland government plans a public offering to sell part of its rail assets. Elders Ltd. profit rises to A$1.1 million in the first half.

[R]3:00 AM New York, 7:00 PM Sydney – There is room for negotiation in the 40% proposed super profit mine tax. BHP says new tax makes Australia less competitive. Queensland government plans a public offering to sell part of its rail assets. Elders Ltd. profit rises to A$1.1 million in the first half.[/R]

The Australian dollar fell against the yen and the greenback after growing risk aversion pushed the euro to its lowest level since April 2006 and as Asian stocks fell extending losses in global equities.

Stocks tumbled 3.1% on renewed concern about the debt crisis in Europe after the president of the European Central Bank Jean-Claude Trichet said Saturday the markets remain fragile.

Investors dumped the euro, which fell to the lowest in four years against the dollar, and sought the safety of gold. Gold prices soared 0.9% to $1,239 per ounce.

The Reserve Bank of Australia is scheduled to release the minutes for the May policy meeting tomorrow.

Commenting on the talks in progress on the proposed super tax on mining profits, Resources and Energy Minister Martin Ferguson said ‘This is a genuine consultation process and we are listening. There is room for negotiation about the finer details.’ He was addressing the Australian Petroleum Production and Exploration Association conference in Brisbane today.

The US based Chevron Corp expects its Gorgon and Wheatstone gas projects in Western Australia to generate as many as 16,500 jobs at their peak. Chevron Australia Managing Director Roy Krzywosinksi said this at the same petroleum conference at Brisbane today.

Royal Dutch Shell plc’s Australian workforce for gas exploration and production is expected to increase fourfold driven by liquefied natural gas projects, said Executive Vice President Ann Pickard in an interview in Brisbane today.

Queensland coal mining companies as a group plan to lodge an initial bid, subject to due diligence, before making a binding final offer, as the Queensland government prepares for a A$3.1 billion initial share sale of the state’s rail networks.

Queensland’s Premier Anna Bligh is planning an IPO offering part of the state-owned QR Ltd, including the tracks and trains, with passenger services to remain in the government hands. The coal producers group which includes BHP Billiton Ltd, Rio Tinto Group, Xstrata Plc and Peabody Energy Corp, appointed Citigroup Inc in March to advise them on the IPO bid.

The Australian dollar also decreased 1% to 87.64 U.S. cents and in Sydney trading ASX 200 Index fell 3.1% or 143.9 to 4,467.20.

Of the ASX 200 index stocks, 11 rose, 186 fell, and 3 were unchanged. Perseus Mining led gainers in the index shares with a rise of 10% followed by Elders Ltd. increasing 4.8%.

New Tax Will Make Australia Less Competitive, BHP

BHP Billiton chairman Jac Nasser wrote in a letter to shareholders today advising them that the proposed new tax by the Australian government will increase the company’s effective tax rate from the present 43% to 57%, the highest in the world.

However, the tax rate in competing resource countries Canada and Brazil is 23% and 27% to 38% respectively.

According to Nasser if the new tax is enforced, “Australia could now be seen by the rest of the world as a less stable and less competitive place for long term investments.”

“In addition, the proposed tax will unfairly impact communities and working families across Australia, the people who provide essential goods and services to our industry, superannuation funds, individual shareholders and future generations,” said Nasser.

Last year BHP Billiton paid A$6.3 billion to Australian government: A$3 billion in Commonwealth Government company taxes, A$1.9 billion in State Government royalties and A$1.45 billion in Commonwealth Government petroleum taxes.

Myer Q3 Sales Flat

Myer Holdings reported today that its sales for the third quarter ended April 24, 2010 were flat at A$671 million from the same period a year ago, but gained 0.3% on a like-for-like basis.

However, sales gained 1.4% to A$2.5 billion in the nine months ended April 24, 2010.

Western Australia and South Australia were the strongest performing states.

Myer maintains that its full year sales will rise 1% to 2% to $3.3 billion, while EBITDA is forecasted to soar 10.7% to A$261 million.

Elders Ltd H1 Profit Soars to A$1.1 million

Primary producer’s supplier, Elders Ltd. reported today that its underlying profit in the six months ended March 31 rose to A$1.1 million from a loss of A$21.8 million in the same period a year earlier.

EBIT grew to A$21.3 million from A$1.6 million a year ago.

The result included non-recurring items totaling $167.0 million; chiefly arising from the results of the Forestry Asset Review announced recently and the write down of the value of Elders’ shareholding in Forest Enterprises Australia Limited.

Elders projects that there will be a substantial lift in earnings in the second half because of suitable market conditions and suitable rainfall in Western Australia.

ASX 200 Index Movers

Perseus Mining led gainers in the ASX 200 index stocks with a rise of 10% followed by Elders Ltd. 4.8%, Eldorado Gold-CDI 2%, Isoft Group 1.8%, and Cochlear Ltd. 1.2%.

Elders Ltd. gained after reporting that its profit rose to A$1.1 million from a loss of A$21.8 million a year earlier.

Atlas Iron led decliners in the ASX 200 index stocks with a fall of 9.1% followed by Mount Gibson Iron 9%, Murchison Metals 8.7%, Ausenco Ltd. 8.6%, and Virgin Blue Holdings 8.3%.

Other Movers

Other commodity prices fell as crude oil prices slipped 2% to $70.2 per barrel. Panoramic Resources plunged 7.8% to A$2.02 and Mincor Resources fell 7.3% to A$1.60.

BHP Billiton tumbled 4.5% to A$36.89 after the miner’s chairmain Jac Nasser noted that the proposed 40% tax on super-profits will make Australia less competitive.

Financial stocks also dropped. Westpac Banking Corp. plunged 6.5% to A$23.28.

Leighton Holdings fell 7.2% to A$32.16 despite reporting that net profit for the nine months to March 31 advanced 82% to A$400 million from A$220 million in the comparable year ago period. Work in hand at March 31 also edged up to A$37.5 billion from A$36.5 billion a year ago.