Hot Aussie economy could tarnish Chevron’s future 26 Apr 2013 The oil giant is poised for better output growth than rival Exxon. But it is more active Down Under, where a strong currency and a crowded market have pushed the cost of its shared Gorgon LNG project up 40 pct to $52 bln. Runaway capex is a risk to an otherwise bright outlook.
Floating LNG offers good economics, tough politics 15 Apr 2013 Woodside Petroleum is the latest energy group to examine building a floating gas facility to salvage an otherwise uneconomic mega-project. The cost savings could be substantial. But the newfangled technology creates fewer jobs than onshore LNG. Host governments won’t like that.
Marius Kloppers will be hard act to follow at BHP 20 Feb 2013 The miner’s outgoing boss benefited from great assets, management discipline, a bull market, and some luck. BHP’s returns were solid under Kloppers, despite the financial crisis. His successor, Andrew Mackenzie, will stick to the formula, but he’ll need more luck to do as well.
China’s role in Rio Tinto chief’s downfall 18 Jan 2013 Tom Albanese’s $38 bln Alcan deal was a bet China would use more aluminium and close down its unprofitable producers. Instead, it has propped them up, helping push prices down and the CEO out of his job. It’s a reminder that China’s state capitalism plays by different rules.
Australia can’t pin its growth hopes on property 27 Nov 2012 As the mining boom sputters, property is being tipped as the country’s new economic engine. Falling interest rates and rising rents suggest a decade-long slide in housing investment may soon be over. But giving up some growth may be more prudent than stoking a real-estate bubble.
Pre-crisis rating laxity still has power to shock 6 Nov 2012 An Australian court has held S&P and ABN Amro liable for investor losses on AAA-rated CPDOs sold at the height of the credit bubble. S&P will appeal. Whatever the result, the ruling exposes the interplay of cynical bankers and inept raters. Today’s watchdogs should take note.
TPG’s pulled bid leaves Billabong investors adrift 12 Oct 2012 After the private equity house walked away from a $700 mln bid the shares fell to 40 percent below the level before takeover talks were revealed. There’s no word on why the bid failed, but Billabong’s business is challenged. The high-profile failure will leave a big stain.
Fortescue buys some breathing space – at a price 18 Sep 2012 The Australian miner has refinanced $4.5 bln of debt with a five-year secured loan. That avoids breached covenants or a dilutive share issue, allowing it to benefit from past spending. Other creditors won’t like being pushed down the pecking order, but the alternative was worse.
Fortescue may get off easy for over-leveraging 17 Sep 2012 The iron-ore miner borrowed heavily to fund a spending binge on the assumption prices would stay high. Now it’s comeuppance time. The shares fell 14 pct on Sept. 13 on talks over debt covenants. But Fortescue isn’t about to run out of cash and there’s time for prices to recover.
Australia will find out if it’s fat or all muscle 11 Sep 2012 Muscular Australia, or flab? The economy looks distorted with paunches in debt, trade and house prices. A less buoyant China and iron ore price are serving as a stress test. Lower rates and a weaker Aussie dollar can help with rebalancing - but might not be needed.
Dropped Aussie coal bid calls end of go-go days 24 Aug 2012 The timing of Nathan Tinkler’s abandoned bid for Whitehaven Coal is apt. A day earlier, Australia’s mining minister caused a ruckus by declaring the resource boom “over”. Mining isn’t finished. But the debt-fuelled approach favoured by this Australian magnate may be.
Spending still needed despite mine capex cull 22 Aug 2012 BHP Billiton’s decision to shelve a $20 bln Australian copper and uranium dig shows reassuring discipline. As lower returns challenge more marginal projects, investors may ask miners to shovel even more cash in their direction. The biggest miners can afford to think longer term.
Whitehaven should give Tinkler cautious welcome 17 Jul 2012 Nathan Tinkler sold assets to the Australian coal producer months ago. Now he’s turning the tables, offering a 50 pct premium for Whitehaven itself. There is some logic to the move. But Whitehaven needs to be sure he can deliver before giving its approval.
Investment banks’ Asian love affair cools rapidly 16 Jul 2012 After the 2008 crisis, it was “Shanghai, Mumbai or goodbye” for the financial industry. But the swingeing decline in Asian equity volumes and commissions has skewered that logic. What was once a growth driver is now an albatross. A second-tier retreat from Asia looks likely.
US hot money’s new crush: Canadian, Japanese banks 25 Jun 2012 It’s hard to blame US money market funds for seeking safer harbors than the turbulent euro zone. Yet Canadian and Japanese lenders - as well as the National Australia Bank - must remember not to become too enamored with the attention from their fair-weather friends.
Qatar’s cash cow can ride out a global gas glut 3 May 2012 The emirate’s grip on gas markets will weaken by the second half of the decade due to oversupply. That might knock some of the swagger out of the energy-dependent state. But Qatar’s low production cost, long-term contracts and significant market share should limit the fallout.
Australia’s rate policy dragged in two directions 2 May 2012 The central bank’s rate cut looks like a response to a slowing China, which will weigh on Australia’s commodity exports. Yet that exposes it to new risks. Australia has built up a reliance on foreign investors to fund its current account deficit. Lower rates could scare them away.
Australian GDP shows vulnerability to cooler China 7 Mar 2012 Mining investment plateaued in the fourth quarter. That left the economy at the mercy of weak housing. Investment may pick up again for a while. But Chinese policy suggests slower increases in demand for stuff from the ground. A linchpin of Australian growth looks wobbly.
Rio Tinto is brave to open dividend gusher 9 Feb 2012 The miner’s 34 pct dividend hike is the latest sop to investors after the disastrous Alcan deal of 2007. Rio can afford it for now. But with capex and cost pressures increasing, Rio needs the super-cycle to continue. Sticking with share buybacks would have maintained flexibility.
Build cost inflation threatens new gas economics 13 Jan 2012 Australia’s latest liquid natural gas mega-project will cost 70 pct more than initially envisaged. The French and Japanese backers should still be able to justify the $34 billion price. But cost inflation makes life more difficult for U.S. groups planning big LNG export facilities.