Australian Indexes Rebound; Fortescue Signs Rail Expansion in Pilbara

Marcus Jacob
21 Dec, 2011
New York City

Australian stocks soared tracking the gains in international markets. The dollar advanced. BHP agreed to sell its 51% stake in the diamond project on Baffin Island in Canada for $9 million to Peregrine Ltd. Fortescue agreed to pay $330 million to expand its railroad network to new iron ore mines.

[R]8:00 PM Sydney – Australian stocks soared tracking the gains in international markets. The dollar advanced. BHP agreed to sell its 51% stake in the diamond project on Baffin Island in Canada for $9 million to Peregrine Ltd. Fortescue agreed to pay $330 million to expand its railroad network to new iron ore mines.[/R]

Australian stocks surged after markets in New York rebounded on better than expected economic data.

After the close, the European Central Bank agreed to lend for three years 489 billion euros to 523 banks and accept expanded collateral. The demand for the cheap loans from banks surprised analysts.

The cheap access to the money to wide range of banks is expected to ease liquidity concerns and avoid liquidity crisis in the region as sovereign bond yields rise near record levels.

The ASX 200 index closed up 2.1% or 86.4 to 4,139.5 and All Ordinaries index gained 83.1 or 2% to 4,190.2.

The Australian dollar edged higher 0.2% and closed at US$1.016.

In trading, 1.73 billion shares changed hands worth $4.08 billion compared to the monthly average of $4.7 billion.

Stock Movers

BHP Billiton Ltd rose $1.01 to $35.13 and Rio Tinto Ltd added $1.51 to $61.73.

BHP confirmed the sale of its 51% stake in Chidliak diamond exploration project on Baffin Island in Canada to Peregrine Diamonds Ltd for C$9 million. The transaction is expected to be completed by Jan of next year. Peregrine also agreed to pay 2% royalty on future production from the project.

Fortescue Metals Group increased 14 cents to $4.50, Lynas Corporation Limited closed up 1 cent to $1.18 and Iluka Resources rose $0.48 to $15.78.

Fortescue agreed to spend $300 million to build 81 kilometer railroad spur from its existing Pilbara rail line to its new iron ore mines. The cost was 10% higher than that estimate only four months and raised speculation that the company may struggle to contain its capital expansion budget of US$8.4 billion.

Alliance Aviation Services Ltd increased 5 cents to $1.70 and extended gains for the second day in a row after the mining crew air services provider priced its initial offering at $1.60 a share.

Oil Search Limited traded up 23 cents to $6.27, Santos Limited added 31 cents to $12.50 and Woodside Petroleum increased $0.37 cents to $30.70.

Commonwealth Bank of Australia increased $1.02 to $49.34 and National Australia Bank added 62 cents to $23.56. ANZ edged up 44 cents to $20.85. Westpac inched higher 41 cents to $20.48.

A day ago Westpac said will defend the class action lawsuit brought by 150,000 customers for the alleged unlawful fees and demanded $200 million.

Spotless Group Limited closed unchanged at $2.41 after the company reiterated its pre-tax earnings estimate in the current financial year between $90 million and $94 million and expects to earn between $140 million and $150 million annual by no later than 2015.

Cochlear fell $1.33 to $63.00 as the company prepares to return to market its recently recalled hearing implant devices.

David Jones Limited increased 1 cent to $2.54 and Wesfarmers Limited increased 65 cent to $30.35 Harvey Norman Holdings closed up 6 cents to $1.88.

Gerry Harvey, the cofounder of the Harvey Norman retailer said in a regulatory filing that purchased 550,000 shares at an average price of $1.82 a share and increased his stake to 29.4% from 29.2%. The company Secretary Chris Mentis told BusinessDay that the stock is trading well below its net asset price of $2.15 a share.

Woolworths Limited closed up 31 cents to $25.92 and JB Hi-Fi Limited increased $0.12 to $12.12.

Billabong International Ltd rebounded 18 cents to $1.95 after the stock lost nearly half its value in the last two trading session after the company issues earnings warning.

Austal Limited decreased 3 cents to $2.21 after the ship builder won an additional order from the U.S. Navy of US$7.9 million.

Qantas Airways Ltd closed up 2 cents to $1.50, Virgin Australia closed unchanged at 35.5 cents and Flight Centre rose 9 cents to $18.67.

QBE Insurance Group Limited increased 2 cents to $13.20.