CORRS ADVISED:

  • Inova Resources in relation to Shanxi Donghui Coal Coking & Chemicals Group's takeover offer

Recent announcements

Following ASX-listed coal explorer Carabella Resources' request for a trading halt of its ordinary shares on 4 December 2013 due to the receipt of an incomplete, indicative confidential and non-binding proposal for a change in control transaction, on 5 December 2013, Wealth Mining announced an off-market, all-cash offer to acquire 100% of the ordinary shares in Carabella. Wealth Mining is a wholly owned subsidiary of one of China's largest privately held mining and energy companies China Kingho Energy Group, which is looking to develop an Australian headquarters for its global resources and development business outside of China. Wealth Mining currently holds 11.06% of Carabella's ordinary shares and is proposing to acquire all the remaining ordinary shares in Carabella at a price of A$0.42 per share. Approval from China's National Development and Reform Commission has already been received and Wealth Mining has confirmed with FIRB that its takeover offer is exempt from Australia's foreign investment policy, and therefore, FIRB approval is not required. Both the Chinese Ministry of Commerce and the Chinese State Administration of Foreign Exchange will need to approve Wealth Mining's takeover offer, and it will also be subject to a 57% minimum acceptance condition. The takeover offer is expected to open on or about 19 December 2013 and close on or about 20 January 2014, unless extended or withdrawn. Wealth Mining has stated that it intends to submit its bidder's statement shortly.

Further to their announcement in March 2013, ASXlisted Aurizon Holdings and GVK Coal Infrastructure (Singapore) Pte Ltd announced on 25 November 2013 that they have reached a significant milestone in their proposed joint infrastructure development, which aims to unlock the Galilee Basin's coal resources. Aurizon and GVK have agreed on a rail solution which initially entails 300 kilometres (down from 500 kilometres) of narrow-gauge railway that will connect to the existing Aurizon rail network. This solution not only significantly reduces initial infrastructure costs, but also allows for the staged development at the Abbot Point T3 terminal to correspond with the actual volumes of coal transported. The proposed open-access nature of the rail and port solution being developed by Aurizon and GVK enables consolidation of tonnes from multiple miners in the Galilee and Bowen Basins, and there will also be the option to expand to a full greenfield railway should increased tonnages later justify further investment. Additional due diligence is to be undertaken by each party and although Aurizon and GVK agree on these key aspects of the development proposal, it remains nonbinding at this stage.

On 4 December 2013, ASX-listed investment and trading house ASF Group announced that it has executed a formal agreement with Civil & Mining Resources (CMR) to acquire a 68.205% equity interest in CMR for cash consideration of A$1,079,270.50. Under the heads of agreement announced on 8 November 2013, ASF will grant a convertible loan facility of up to A$5 million to CMR over 2 years which contains an option for ASF to convert that into CMR shares. If ASF does not convert upon maturity of the loan, the loan will be repayable, with 10% interest per annum, by CMR. Completion of the acquisition remains subject to conditions including FIRB approval.

ASX-listed Linc Energy announced on 13 November 2013 that it plans to divest or de-merge its coal division, wholly owned by its subsidiary New Emerald Coal (NEC), following Linc Energy's anticipated listing on the Main Board of the Singapore Exchange in December 2013. As reported in the November 2013 edition of the Australian Mining Sector Update, NEC recently entered into a sale and purchase agreement with ASX-listed Rio Tinto to acquire the Blair Athol Coal Mine. NEC has announced a JORC Resource for the Blair Athol mine of 46 Mt (12.6 Mt Measured, 8.5 Mt Indicated and 25 Mt Inferred) which should enable production at 3 Mtpa for 10 years. NEC has also announced a VALMIN compliant valuation for its coal division of A$440 million, consisting of A$181 million for the Blair Athol mine and A$295 million for the Teresa coal project. Linc Energy has noted that this divestment and de-merger marks a significant step in the company's strategy to focus on its core energy business of conventional and unconventional oil, gas, shale and UCG.

On 28 November 2013, ASX-listed Rio Tinto announced its plan to increase its iron ore mine production capacity in Western Australia towards 360 Mtpa. Extra iron ore tonnage is set to come from multiple low-cost brownfield expansions at mines including Brockman 2, Brockman 4, Paraburdoo, Yandicoogina and West Angelas, and is expected to increase production from 290 Mtpa in June 2014 by more than 60 Mtpa until 2017. Rio Tinto also announced that it has approved A$400 million worth of capital expenditure in support of these brownfield expansions. Rio Tinto's Chief Executive Sam Welsh has commented that the company's breakthrough plan of combining brownfield expansions and unleashing lowcost productivity gains means that Rio Tinto will deliver the expansion at an estimated capital cost of more than A$3 billion below previous estimates.

In further Rio Tinto news, on 1 November 2013 Rio Tinto announced it will partner with China's diversified mineral resources company Chinalco to explore how the companies can jointly develop and deploy cutting-edge technology aimed at producing safer working operations, improving environmental performance and increasing productivity of mining operations. Rio Tinto and Chinalco have signed a memorandum of understanding in relation to the technology partnership under which the parties intend to employ their respective strengths to advance the development of Rio Tinto's "Mine of the FutureTM" programme, as well as additional new mining technology. The proposed partnership between the parties remains subject to the execution of a binding agreement.

Further to our story in the November 2013 edition of the Australian Mining Sector Update, on 22 November 2013 ASX-listed companies MetroCoal and Cape Alumina announced that they have agreed not to proceed with their proposed merger following an announcement by the Queensland Government on 20 November 2013 which effectively renders Cape Alumina's flagship Pisolite Hills bauxite project unable to be mined. In its announcement, the Queensland Government stated its intention to declare a "Strategic Environmental Area" over the Steve Irwin Wildlife Reserve and the Wenlock River on Cape York Peninsula. The Pisolite Hills project is located within the Steve Irwin Wildlife Reserve and the proposed declaration prohibits any mining on the site.

Following a report by The Australian that Yanzhou Coal's application to waive conditions that it list 30% of ASX-listed Yancoal Australia by the end of 2013 has been rejected by FIRB, on 19 November 2013 Yancoal announced that the Independent Board Committee of Yancoal is unaware of any such FIRB decision. As reported in the August 2013 edition of the Australian Mining Sector Update, Yancoal announced on 9 July 2013 that it had received an indicative, non-binding takeover offer from Yanzhou Coal (its majority shareholder).

Recently completed deals

Further to our stories in the October and November 2013 editions of the Australian Mining Sector Update, on 15 November 2013 Shanxi Donghui Coal Coking & Chemicals Group announced the successful completion of its unconditional off-market takeover offer for all of the ordinary shares in ASX-listed Inova Resources at a price of A$0.22 per share. As at the morning of its announcement, Shanxi Donghui had acquired 95.37% of Inova's ordinary shares as a result of acceptances of its takeover offer. As indicated in its bidder's statement, since Shanxi Donghui has achieved at least 90% of acceptances for its takeover offer, Shanxi Donghui intends to compulsorily acquiring the remaining Inova ordinary shares at a price of A$0.22 per share. Inova was removed from the official list of the ASX at close of trading on 27 November 2013. Corrs advised Inova on this takeover.

On 3 December 2013, the Queensland Government announced that it has sold 74.3 million shares in ASXlisted Aurizon Holdings at a price of A$4.71 per share, bringing its shareholding to under the 5% substantial shareholder threshold level. To date, the Queensland Government has raised more than A$2.7 billion in divestments in Aurizon since its initial public offer.

Market rumours and opportunities

Mergermarket has reported that ASX-listed, Western Australian-based iron ore miner Magnetic Resources is looking to raise US$25 million from overseas investors through the sale of a minority interest in its Ragged Rock magnetite project located in Western Australia's southwest. Magnetic's Managing Director George Sakalidis has stated that the company welcomes approaches from advisors with financial and strategic recommendations. Magnetic is believed to be particularly interested in finding a potential Chinese investor with the experience and technology to jointly explore and develop the Ragged Rock project. However, other ideal investors may reportedly include magnetite producers, geological institutions or financial investors with experience in the sector, all of which would be interested in investing in early-stage projects. The Ragged Rock project has a JORC inferred resource of at least 100Mt and is located close to critical rail and road infrastructure.

The Australian Financial Review has reported that Chinese steel company Baosteel could potentially be introduced as a new partner in ASX-listed Aquila Resources' West Pilbara iron ore project. Boasteel already holds an approximate 15% shareholding in Aquila and is reportedly interested in acquiring a direct interest in the West Pilbara project, which is said to be valued at A$7.5 billion. Speculation surrounds the potential sale of AMCI's 25.5% interest in the project.

According to Mergermarket, ASX-listed Atlas Iron is seeking acquisition opportunities for iron ore projects located in the North Pilbara region, and has a particular interest in assets that will generate synergies with its existing mines. A sector banker has reportedly speculated that ideal targets for Atlas would be those located close to its undeveloped Horizon I and Horizon II projects, with a production rate of around 5 Mtpa. It has been further suggested that Atlas may reportedly conduct an equity raising in order to finance any acquisitions in the near future, despite recent write-downs in the asset values of the Horizon I and II projects totalling A$458 million.

The Australian Financial Review has reported that Canadian mining company Teck Resources put 91.5 million shares in ASX-listed Fortescue Metals on the market on 7 November 2013 at a sale price of A$5.50 per share. Reportedly, Teck has a 3% shareholding in Fortescue Metals. The divestment looks to raise approximately A$503 million for Teck and the share sale price of A$5.50 per share represents a reported 20% discount on the price of Fortescues Metals shares prior to the sale listing.

The divestment of ASX-listed Rio Tinto's majority share in Iron Ore Company of Canada (IOC) is becoming more and more unlikely to complete according to Mergermarket, with one sector banker reportedly describing the sale process as being "on life support". Reportedly, Rio Tinto's price expectations remain too high at an expected US$3 billion for the IOC interest. Several industry sources have commented that the valuation gap (between Rio Tinto's expectations and the price potential buyers are willing to pay) is proving to be too great a hurdle to overcome.

According to the West Australian, ASX-listed Iron Ore Holdings is seeking a partner in order to develop its Buckland iron ore project located in Western Australia's Pilbara region. IOH's Managing Director Alwyn Vorster has reportedly stated that the company is participating in discussions with several interested parties and that all options from both domestic and international potential investors are being considered. Reportedly, IOH anticipates finding a funding solution for the Buckland project following the completion of final feasibility studies in March 2014.

Mergermarket has reported that Chinese stated-owned international trade and logistics services provider CNBM Import & Export is looking to acquire iron ore mines in countries including Australia. Reportedly, CNBM is seeking to increase its access to upstream raw material and could spend up to US$160 million on a transaction. CNBM reportedly welcomes recommendations from advisors as to suitable acquisition targets.

According to the Western Australian, Korean steel business POSCO is going to offer its 12.5% interest in Roy Hill Holdings as security in order to obtain funding from export credit agencies in countries including Korea, Japan and the United States for the Roy Hill iron ore project. Reportedly, the Roy Hill project is relying on securing a total of approximately A$7 billion worth of funding before the end of 2013, with A$3 billion of that amount anticipated to come from a commercial lender and the remaining A$4 billion from export credit agencies. POSCO's interest is reportedly valued at A$1.4 billion.

Regulatory updates

REGIONAL PLANNING INTERESTS BILL 2013 (QLD)

The Regional Planning Interests Bill 2013 (Qld) was introduced into the Legislative Assembly on 20 November 2013. The Bill seeks to repeal the Strategic Cropping Land Act 2011 (Qld) and has the objective of managing the impact of resource and other regulated activities on areas of regional interest.

Among other provisions, the Bill proposes to:

  • define areas of regional interest to be priority agricultural areas, priority living areas, strategic cropping areas or a strategic environmental areas;
  • exempt particular resource activities from requiring a regional interest authority (that is, a regional interest decision that approves all or part of the activity that is the subject of an assessment application);
  • provide that a person may only carry out a resource activity or regulated activity in an area of regional interest if the activity is either an exempt resource activity or the person holds, or is acting under, a regional interest authority for the activity; and
  • prescribe that a person may apply for a regional interest authority by making an assessment application to the chief executive of the department administering the Environmental Protection Act 1994 (Qld), who must consider and decide the application.

Corrs has prepared a Thinking Piece regarding the additional approvals needed for resource projects under the Regional Planning Interests Bill 2013 (Qld), which can be viewed here.

MINING AND PETROLEUM LEGISLATION AMENDMENT (PUBLIC INTEREST) BILL 2013 (NSW)

After being introduced into the Legislative Assembly on 21 November 2013, the Mining and Petroleum Legislation Amendment (Public Interest) Bill 2013 (NSW) was passed on 27 November 2013. The Bill amends the Mining Act 1992 (NSW) by introducing public interest as a ground for making a variety of decisions relating to mining and petroleum rights or titles, including decisions to refuse to grant, renew or transfer such rights or titles. The Bill also covers pending applications for mining and petroleum rights and titles.

Other news

QUEENSLAND PORTS DELIVERING RECORD COAL HAUL

Queensland's northern ports are experiencing strong growth with coal export volumes exceeding pre-GFC levels. In October alone, Gladstone and Dalrymple Bay recorded 5.98 Mt and 5.79 Mt of exports respectively, putting Queensland's ports on target to top the 200 Mt mark for 2013/14. According to Queensland Transport and Main Roads Minister Scott Emerson, this would be an 11.5% increase on the 180.2 Mt exported in 2012/13.

Queensland Treasurer and Minister for Trade Tim Nicholls has stated that the Queensland Government's focus on resources has also seen the stabilisation of coal prices, with the Hard Coking Coal Benchmark Price up 5%, the first increase in more than two years. Mr Nicholls has also noted that the opening of the Kestrel South and Daunia mines in the Bowen Basin demonstrates that coal companies believe they have a future in Queensland.

PORT OF NEWCASTLE TRANSACTION PROCESS LAUNCHED

The New South Wales Government has called for expressions of interest for the 98-year lease of the Port of Newcastle, marking the first step in the process of shortlisting qualified parties who will be invited to submit final proposals for the Port. The New South Wales Government's decision to lease the Port follows a scoping study that confirmed it was in the best interests of New South Wales' residents.

New South Wales Treasurer Mike Baird has stated that "bidders will need to strongly demonstrate their experience, expertise and capability to be the long-term steward of the Port and develop it over time", and has also noted that the New South Wales Government will retain regulatory oversight of the Port, as well as responsibility for maritime safety and security functions.

Interested parties have until 10am on Monday 9 December 2013 to lodge their expression of interest, and are encouraged to contact the New South Wales Government's financial advisor at newcastle.port@ morganstanley.com.

GALILEE BASIN DEVELOPMENT STRATEGY UNVEILED

The Queensland Government has unveiled its Galilee Basin Development Strategy aimed at facilitating the development of the Galilee Basin, in particular early development of the southern and central regions of the Basin.

The Development Strategy highlights initiatives across a number of themes including:

  • lowering start-up costs;
  • streamlining land acquisition, planning, approvals and red tape reduction;
  • positioning Abbot Point as the Galilee's gateway to the world;
  • supporting infrastructure development and corridors; and
  • supporting regional communities, and offers incentives to encourage first mover advantages for those seeking to develop key infrastructure.

Queensland Deputy Premier and State Development, Infrastructure and Planning Minister Jeff Seeney has stated that the proposed projects in the Galilee Basin currently have a total forecast investment of A$28.4 billion. A copy of the Development Strategy is available here.

FURTHER COMMENTS WELCOMED ON THE CARMICHAEL COAL PROJECT ASSESSMENT

Queensland Deputy Premier and State Development, Infrastructure and Planning Minister Jeff Seeney has asked State agencies and the public to provide feedback on the additional information Adani has put forward in support of its Environmental Impact Statement (EIS) for its proposed Carmichael Coal Mine and Rail Project. The A$16.5 billion project will be located approximately 160km north-west of Clermont in Central Queensland and will feature a combination of open-cut and underground mining operations.

The EIS was originally released for comment between 15 December 2012 and 11 February 2013, with 67 submissions received raising issues such as impacts on groundwater and surface water supplies and on agricultural activities. The Coordinator-General sought further information from Adani in relation to those submissions, the provision of which is the subject of this request for further comments.

Further information is available here and submissions can be made up until 5pm on Friday 20 December 2013.

QUEENSLAND RESOURCE PERMITS – FINANCIAL AND TECHNICAL DOCUMENTATION REQUIREMENTS

The Queensland Department of Natural Resources and Mines (DNRM) has released an announcement clarifying the documentation requirements for financial and technical capability statements.

DNRM acknowledges that the provision of funding and technical resources for a permit may be shared across multiple permit holders, or one permit holder may assume the majority of responsibility. As such, DNRM has stated that, while financial and technical capabilities need to be proven, each and every holder does not need to provide a statement. However, it is still worth noting that all permit holders still retain joint overall responsibility for the permit, purely by the fact that they are holders.

Further information on financial and technical capability statements and permit administration in Queensland is available here.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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