BREAKFAST DEALS: Rinehart prospects

Hancock Prospecting reportedly seals its first sales contract, while China looks to have ticked Hanlong's Sundance takeover.

Amid talk of cost blowouts and frightened financiers, Gina Rinehart finally has some reassuring news about her upcoming Roy Hill development. Still, analysts question whether it will be enough to land the mining kingpin a multi-billion dollar debt package under negotiation. Meanwhile, Sundance Resources is said to have received a buyout blessing from China, while deal sparks fly at Dick Smith.

Hancock Prospecting, Shougang Group

Gina Rinehart has reportedly inked the first sales contract linked to the proposed Roy Hill iron ore project, which may help win over a group of bankers holding out on committing to a $6 billion funding package for the mine.

Roy Hill, which is controlled by Rinehart's Hancock Prospecting, has signed on one of China's biggest steel companies, Shandong Group, as a long-term buyer, according to The Australian. The deal is viewed as being an important first step in shoring up confidence in the development amid a sharp fall in the price of iron ore.

The news also comes against a backdrop of rumoured cost blowouts at Roy Hill, where the construction bill was supposed to be $7 billion. Now there's talk the figure might jump to $10 billion.

The Australian believes the overruns have become a sticking point in debt negations. A planned financing package, backed by a syndicate global creditors, is being held up due to talks on capping construction costs.

The mine, which counts Posco, STX, Marubeni and China Steel Corp as minority equity investors, is scheduled to begin production by the end of 2014. In the current environment, that looks optimistic.

Hanlong Mining, Sundance Resources

Shares in Sundance Resources are today likely to resume trade – possibly with a spike – amid rumours a $1.65 billion buyout bid from Hanlong Mining has been cleared by China's top planning body.

A conditional seal of approval from the National Development Reform Commission is said to have arrived at Sundance's Perth headquarters late yesterday, according to The Australian Financial Review. However, there's no word yet on what those conditions might be.

Sundance shares last traded at 33.5 cents, which reflects great uncertainty about the 57-cents-a-share offer from China. While the nod from the NDRC will reassure investors, sources told the newspaper it will probably take "many months" to finalise the deal.

NDRC approval will pave the way for Sundance shareholders to vote the deal through, although their support might still depend on the conditions China attaches.

Australia's Foreign Investment Review Board approved the takeover in June.

Anchorage Capital, Dick Smith, Woolworths

Woolworths' sale of its Dick Smith unit appears to be drawing to a close, as the general manager of the electronics chain, Debra Singh, ends her 11-year career with the company.

In a memo to staff yesterday, Singh said now is the right time for her to resign, "with the divestment of Dick Smith close to completion," according to The Australian Financial Review. The sale is expected to close within the next fortnight.

Singh has been instrumental in the divestment of her division, which was flagged in January following a strategic review. She has since closed more than 25 stores and hosted investment presentations to scores of interested parties.

However, those ranks have thinned significantly, which may not bode well for the final price. The most likely bidders are now said to be private equity group Anchorage Capital, or a syndicate led by former Woolworths chief financial officer Bill Wavish.

Whoever the buyer turns out to be, Singh will leave Dick Smith in August.

Alesco, DuluxGroup

Things aren't looking good for Alesco. After making so much noise about DuluxGroup's hostile buyout bid – including sending it to the Takeovers Panel – two of the target's largest shareholders have jumped ship.

Dulux yesterday won the support of Northcape Capital, with a 4.9 per cent stake, and Wilson Asset Management (4.5 per cent), which have agreed back the suitor's $200 million offer.

Interestingly, The Australian Financial Review's Tony Boyd reports WAM only started buying Alesco shares last week, apparently in support of the Dulux bid. The asset manager plans to continue buying the stock, potentially investing another $22 million on top of the $8.5 million already forked out.

All this comes on top of the 19 per cent stake Dulux had already amassed in Alesco, bringing its running total to about 38 per cent.

For its part, Alesco points out 62 per cent of the register has not accepted the Dulux offer, which has a 90 per cent minimum acceptance condition.

Of course, if the suitor were to get above 50 per cent, it could dump Alesco's board and drop the acceptance condition completely.

Wrapping up

Chinese oil and gas giant PetroChina is reportedly preparing to buy Molopo Energy's Queensland coal seam gas assets, in a deal that could be announced as early as today.

An unnamed source told The Australian the acquisition would involve interests in five coal seam gas projects to the wet of Gladstone. Analysts have valued the assets at between $42 million and $82 million.

While on the topic of Chinese investment, the Middle Kingdom is also apparently interested in buying Australian government bonds.

Chinese officials from the State Administration of Foreign Exchange, which controls $US3.2 trillion of reserves for the People's Bank of China, have met with state governments in New South Wales and Victoria to discuss buying their bonds, sources told Dow Jones Newswires.

The securities, known as semi-government, are issued by state funding agencies to fund infrastructure and public spending programs.

And finally, Caltex Australia plans to raise $300 million through through the sale of hybrid securities, aimed at funding the conversion of its Kurnell refinery in Sydney to an import terminal.

The notes will be issued at $100 each, with a 25-year maturity and a first call date after five years.

Caltex expects Kurnell's closure and conversion, scheduled for 2014, will cost about $680 million.


SMS Code Sent…

We have sent you a code via SMS to {{user.DayPhone}}

please enter this code below to activate your membership

If you didn't receive SMS code please

Log in to access this content

Looks you are already a member. Please enter your password to proceed

Hi {{ user.FirstName }}

Verify your mobile number to unlock a FREE trial

Looks like you've already taken a free trial

Please sign up for full access

Updating information

Please wait ...

Related Articles