Origing Energy, Boart, Windimurra Surge

123jump.com Staff
30 May, 2008
New York City

Allco Finance Group agreed to a tougher financial conditions to refinance its $255 million of debt and Centro Gruop requested a trading halt on its stock as it negotiates with its creditors. Origin Energy surged 7% after it rejected $13 billion bid from the UK based BG Group. The provider of drilling services to mining companies, Boart Longyear Ltd stock gained 12% after it lifted its annual sales growth estimate to between 20% and 25% from the previous estimate of 15%.

[R]3:00AM New York, 7:00PM Sydney – Allco agrees to a debt refinancing and Centro group requests a trading halt. Origin Energy surges after it rejected BG Group bid.[/R]

Market Sentiments

ASX 200 index fell 1% or 54.7 to close at 5,654.70.

The Preliminary market turnover was 2.27 billion shares worth $10.45 billion, with 606 stocks down, 617 up and 362 unchanged. The most traded stock was Telstra with 81.2 million shares worth $217.5 million.

Market Driver

Australia's largest coal-seam gas producer, Origin Energy Limited today turned down a revised bid proposal of $13 billion from the UK based gas producer BG Group Plc. The company expects a higher bid.

The company said it had received a CSG reserves report, which has increased its 3P reserves by 121%. It added that it had commissioned Netherland, Sewell & Associates Inc. to review and certify its reserves and resources in its CSG tenements.

Origin noted in its press release that, ""This report shows, as at 15 May 2008, significant expansion in the CSG resource base available to Origin with a 91% increase in 2P reserves to 4,715 PJ and a 121% increase in 3P reserves to 10,122 PJ.

The report also identifies a Contingent (2C) Resource of 13,497 PJ and Prospective Resources of 17,947 PJ. This certified assessment confirms Origin's preeminent position as the largest holder of CSG reserves and contingent resources in Australia and demonstrates Origin's unparalleled record of converting resources into reserves.""

Origin chairman Mr Kevin McCann said, ""The Board of Origin has given careful consideration to all of the relevant information available to it, particularly the substantial increase in the company's CSG resource base and the demonstrably higher value now placed on CSG resources.

Origin said it would now focus on how to get the best value from its reserves, possibly through partnerships to supply a liquefied natural gas (LNG) plant or even through a break-up of the company, which also has power generation and retail businesses.

Origin said it was open to talking to BG about supplying its planned LNG plant in Gladstone, Queensland, or any other offer. Its share was up 6.9%.

Gainers and losers

Of the ASX 200 index stocks, Platinum Asset the gainers with a rise of 12% followed by increases in Boart Longyear of 11.6%, in ABC Learning of 10%, in Beach Petroleum of 7.7% and in Bendigo and Adel of 7%.

Of the ASX 200 index stocks, Allco Finance GR led the decliners with a fall of 13.7% followed by losses in Emeco Holdings L of 10.2%, in AED Oil Ltd of 8.4%, in Oil Search Ltd of 8.4% and in Aquarius Platinum of 7.4%.

Equigold NL shareholders approve merger with Lihir Gold

The merger of Lihir Gold Ltd and Equigold NL has been approved overwhelmingly by Equigold shareholders with 93% shareholders in the favor of merger.

Equigold said in a statement a hearing before the Federal Court of Australia to approve the scheme had been set for next Tuesday after which it would announce the result immediately after the hearing.

""By the end of 2008, we expect to have four mines in operation in three countries, producing at an annual rate of more than 1.2 million ounces of gold.

Chairman Ross Garnaut said, ""We are pleased to bring Equigold's shareholders on to the LGL register and look forward to sharing with them in the future development of the mines at Lihir, Ballarat, Mt Rawdon and in Ivory Coast.""

LGL chief executive Arthur Hood said, ""The combination of LGL and Equigold promises to deliver excellent returns for shareholders in future years. The Bonikro mine will be coming into production early in the second half of 2008, and then at the end of the year, Ballarat will commence commercial production.

This will add to the strong growth coming through at Lihir Island, following the expansion of the process plant last year, and the very consistent, low cost performance of the Mt Rawdon mine. Beyond 2008, we have significant expansion plans under way at Lihir Island, and major potential for expansion at Ballarat and in the Ivory Coast. So the merged group represents a very attractive investment and I am pleased to see Equigold shareholders recognizing that potential.”

Shares of Lihir Gold fell 1.7% and of Equigold shed 2%.

Centro requests trading halt ahead of debt repayment deadline

Centro Properties Group and its subsidiary Centro Retail today requested a trading halt in its shares as it negotiates with creditors for A$6.6 billion of debt. The troubled shopping mall operator is negotiating with lenders to rollover some of its debt.

Centro was granted an extension on debts by lenders on May 8 on condition that it completes $155 million of new borrowings and reaching an agreement with creditors by today. Centro has been negotiating to sell shopping mall that it acquired on borrowed funds at a substantially higher price than the market values of today.

Centro's share rose 8.6% yesterday after the company said talks were at an advanced stage on the sale of a fund that holds malls based in the U.S. worth $1.2 billion. Centro Retail shares were up 17%.

Gunns share tumble on ANZ fund withdrawal

Shares in forestry products supplier, Gunns Ltd fell 1% today as the market responded to yesterday's decision by ANZ Banking Group Ltd to withdraw funding to controversial $2 billion pulp mill project in Tasmania's Tamar Valley.

Gunns shares opened down five cents at $3.00 day, and closed three cents lower at $3.02. ANZ announced that it would not be funding the mill and Gunns’ chief executive John Gay retaliated by indicating that the mill would proceed without ANZ's involvement. He indicated that international investors are interested in funding projects.

Gunns hopes to start site construction by June, with production to start in July 2010. Meanwhile groups opposed to the planned Gunns pulp mill have vowed to pressure overseas banks not to fund the controversial project.

The Wilderness Society and the Greens say the ANZ's decision sends a strong message to other banks. The Wilderness Society's Geoff Law says other banks in Australia will not go near the project now. Tasmanian Environment Minister Michelle O'Byrne says the pulp mill's future is in the hands of Gunns and its bankers.

CBA denies claims of possible acquisitions

Commonwealth Bank of Australia Ltd has quashed prediction by a broking house that it was planning to acquire a general insurance business.

CBA group executive wealth management Grahame Petersen said the bank's strategy was to build its general insurance business organically, which they were achieving through the distribution of home, contents and motor vehicle insurance through their branch networks.

""We do not currently believe that the purchase of a general insurance business would be in the long term interests of our shareholders and we have no plans to do so,"" Mr Petersen said in a statement to the stock exchange on Friday.

CBA indicated on Wednesday that its new motor insurance business was doing well, with sales twice what it expected. Analysts at Citigroup however told reporters that CBA may be tempted to grow through acquisitions because it likes to be the dominant market player.

CBA fell 1.1%.

Queensland launches $200 million loan offering

Australian regional lender Bank of Queensland Ltd is reported to have launched a $200 million 2.5-year loan today. Reuters news service reported that the deal is arranged by ABN Amro Australia and China Trust Commercial Bank.

The loan is structured to avoid interest withholding tax under Australian law, banking sources said. Bank of Queensland is a full service regional retail bank with loans under management of $24.3 billion and retail deposits of $12.9 billion.

Allco Finance agrees to higher interest payment to reschedule debts

Allco Finance Group today advised that it had reached agreement with its banks to further extend both the $250 million bridge facility and the review period consequent on the Review Event until 30 June 2008.

The group said in a statement to the ASX that the latest extension enables the continuation of ongoing negotiations between Allco and its full senior bank group for a restructuring of all of Allco's senior debt facilities.

""From 30 May 2008, Allco has agreed to increase the margin payable under its senior debt facilities from 70-95 bps above the relevant currency borrowing reference rate to 300 bps above,"" it said.

Allco said it had delivered a business plan to the banks, which entails restructuring the business to focus on its core asset classes, and an asset sale program to support the pay down of senior debt to a target of $400 million by September 2009. It added that it continues to meet its scheduled repayments of principal and interest under this plan.

""As anticipated in Allco's ASX announcement on 1 May 2008, a further $78.3 million will be repaid to Allco's senior banks today from the proceeds of completed asset sales, bringing the total repayments since April 2008 to $145.8 million.

""Allco's drawn borrowings under its senior debt facilities, after repayment of the $78.3 million noted above, will be $862.1 million. Actual and anticipated contingent commitments, such as letters of credit, under the facilities will be $63.5 million (compared to $45.0 million as at 30 April 2008).

""This results in a net reduction of outstanding senior debt and contingent commitments of $58.9 million (after currency fluctuations). Whilst positive progress continues to be made, it should be noted that until negotiations are finalised and restructuring documentation is signed, there can be no assurance that a restructure of Allco's senior debt facilities will be concluded successfully,"" the group said.

Its share fell 13.7%.

Gary Kent appointed as new Healthscope chief financial officer

Healthscope has appointed former Coles Group Ltd chief financial officer Gary Kent as its new chief finance officer with effect from August 4.

Kent would replace Josef Czyzewski who assumes the role of director corporate strategy and business development, a newly created role to drive the future growth of the private hospital operator. Mr Kent was CFO of Coles before the supermarket giant was bought by West Australian-based conglomerate, Wesfarmers Ltd.

Boart Longyear Ltd shares up on revised full-year sales forecast

Boart Longyear Ltd., the provider of drilling services to mining companies including Rio Tinto and BHP Billiton Ltd, surged 12% after it revised its sales forecast for 2008 and operating margins at the level achieved in the second half of 2007.

Sales in 2008 are expected to grow between 20% and 25%, compared with a previous forecast of 15%, Boart said today in a statement and margins in the year 2008 are expected to be at the level achieved in the second half of 2007. The company revised its estimate based on the continued demand from mining and exploration industry and sees no impact from the current malaise in the global financial markets.

Portman Ltd dismisses speculation over Golden West bid

Australia's third largest iron ore miner, Portman Ltd has again dismissed media speculation on a possible bid for iron ore explorer Golden West Resources Ltd.

Portman said that it had no intention to acquire Golden West and repeated the comments on Friday following further speculation in Friday's The Australian newspaper.

""Portman repeats its position, which it announced on 28 May 2008, that it has not undertaken any preparation for a possible bid for Golden West and nor does it have any current intention to make a takeover offer for Golden West,"" Portman said in a statement on Friday.

The company was responding to media reports on Wednesday. Portman amassed a 14.9% stake in Golden West in April and May. Portsman's majority shareholder is North America's largest producer of iron ore pellets, Cleveland Cliffs.

Portman also said it had not contemplated increasing its stake in Golden West through any transaction involving Fairstar Resources Limited a major shareholder in Golden West. Portman said it had applied to the Foreign Investment Review Board for approval to be able to increase its interest in Golden West to 19.9% as part of its strategic investment in Golden West.

Windimurra shares up as companies aim to increase production

Western Australian mining company, Windimurra Vanadium Ltd's share rose by 2.1% today after the company disclosed that it was aiming to provide 8.5% of the world's vanadium. The power shortage in South Africa has curtailed the world supply of the metal. The chief executive Ian Scott predicted the prices to rise as the global supply is expected to remain tight for the next four years.

Windimurra expects to produce at least 5,500 tons beginning in 2009 and when the world supply is expected to be near 55,000 tons. The global demand is expected to increase if the current growth rates are continued in the next four years. Vanadium prices have surged after the power shortages emerged in South Africa.

The alloy used to harden steel for oil drilling pipes has suffered dramatic swings in price. The vanadium oxide prices were as low as $2 per pound in 2000 and as high as $24 per pound in 2005. The world consumption has jumped from 140 million pounds to 230 million pounds in 2007. Vanadium has been trading between $14 and $16 per pound in the month of May 2008.

Highveld Steel & Vanadium, based in South Africa but controlled by Evraz group of Russia, controls 35% of the global market and expects the production to decline 12% in the current fiscal year.