Australian Stocks Struggle; BHP Alumina Project Cost Up $3 Billion

Mukesh Buch
24 Jun, 2011
New York City

Australian stocks struggled after crude oil plunged more than 4%. The commodities markets also trended lower. BHP said it will invest nearly $500 million in its potash mining operation in Canada and its alumina refinery operation in Western Australia will cost significantly more.

[R]5:00 PM Sydney – Australian stocks struggled after crude oil plunged more than 4%. The commodities markets also trended lower. BHP said it will invest nearly $500 million in its potash mining operation in Canada and its alumina refinery operation in Western Australia will cost significantly more.[/R]

Australian stocks edged a fraction higher as crude oil plunged and Greece agreed with the International Monetary Fund with austerity terms. In domestic news, Australia completed the sale of $750 million bonds due in 2015.

International Energy Agency controlled by wealthiest nations of the world decided to release 60 million barrels in the world market to make up for the lost production from the NATO aggression in Libya.

The U.S. will release 30 million barrel from its reserves as part of the IEA action.

The ASX 200 index increased 7.60 or 0.2% to 4,508.1 and All Ordinaries index fell 0..08% 3.6 to 4,565.

The Australian dollar decreased to US$1.052 and crude oil dropped 4.3% to US$91.67.

In trading, turnover was flat at 2.34 billion shares worth $7.5 billion. Of the stocks traded, 509 stocks increased, 653 decreased and 399 closed unchanged.

Reserve Bank of Australia assistant governor Phil Lowe said at a gathering in Adelaide that inflation may increase if the optimistic world economic scenario becomes real and the central goal of the bank is the keep “low and stable inflation.”

Stock Movers

BHP Billiton traded higher 30 cents to $42.34 and the company said it will cost more and take longer to complete its Worsley Alumina refinery in Western Australia. The mining company revised its share estimate to US$3 billion from U$1.9 billion in 2008. BHP has 86% stake in the Worsley project.

The refinery after the expansion will have annual capacity of 4.6 million tons from the current capacity of 3.6 million tons a year.

Separately, BHP also said it will invest US$488 million at its potash mining operation in Saskatchewan, Canada.

Rio Tinto increased 40 cents to $80.40.

Energy related companies declined after crude oil futures of immediate delivery fell 4.5% after the IEA decided to release 60 million barrels from reserves of member nations.

Santos Ltd declined 10 cents to $13.27 and Woodside Petroleum fell 20 cents to $40.20. Oil Search decreased 4 cents to $6.41.

Telstra declined 8 cents to $2.88 after the company agreed in a historic deal with National Broadband Network for $11 billion. The company will also incur $2 billion in costs.

Banks closed lower after a rating agency Fitch said Australian and Korean banks have the most exposure to Euro-zone stress dislocation and the ongoing Greek sovereign debt turmoil.

Banks in both nations are reliant of short term funding from wholesale market. In the event, financial markets suffer if Greek debt implodes the banks are likely to face a challenging environment in refinancing debts.

ANZ increased 2 cents to $21.47, National Australia Bank declined 20 cents to $24.66 and Commonwealth Bank increased 64 cents to $51.13.