Another Fine Piece Of Timing

Sydney Morning Herald

Tuesday March 6, 2007

Edited by Jamie Freed; xchange@smh.com.au

Suddenly what was Greater becomes the lesser. Never list on a wet Monday.

CALL it the curse of Bendigo - or at least very poor timing.

Greater Bendigo Goldmines found the going tough on its first day of trading yesterday after it raised $4 million to explore for gold near the historic Victorian mining town.

Greater Bendigo's shares began trading at 12.5c - a whopping 37.5 per cent discount to its 20c issue price.

That's pretty unusual given gold is a hot - well, warmish - commodity at the moment. But perhaps the name alone was enough to spook investors.

Greater Bendigo chose to float just two months after Bendigo Mining shocked the market by ceasing production and returning to exploration. And Greater Bendigo's managing director, Doug Cahill, had been a founding director of Bendigo Mining.

After Bendigo Mining shares were savaged in January, St Barbara Mines swooped to pick up a 10 per cent stake at 34.8c. At the time, analysts presumed that was a floor price for battered Bendigo shares.

But yesterday, St Barbara's investment was underwater. Bendigo shares fell 2.5 to 30.5c, while Greater Bendigo shares closed at 14.5c.

Lucky miss

Rio Tinto and BHP Billiton reportedly missed the cut in the final round of bidding for a 51 per cent stake in Indian iron ore miner Sesa Goa worth more than $1 billion.

But the rejection may actually prove lucky.

Just as Sesa Goa was finalising its short list - said to include Arcelor Mittal, CVRD, Vedanta, and Aditya Birla - the Indian Government announced plans to add a 300 rupee ($8.76) a tonne levy on iron ore exports amid rising demand from domestic steelmakers.

Although the tax has yet to be ratified by India's parliament, news of the levy caused Sesa Goa shares to plunge 17 per cent last week.

Sesa Goa sells about 69 per cent of its 9 million tonne a year output to China, Taiwan and Japan. The tax would cut the company's earnings by about $US41 million ($53 million).

But what's bad news for Sesa Goa should be good news for BHP and Rio. As Deutsche Bank analysts noted, if India sold less of its iron ore into China, it's likely much of the replacement ore would come from Australia.

"We continue to see the balance of risks on the upside for [benchmark iron ore prices next year]," Deutsche said.

Has no clothes

After considering its options for weeks, it seems like Emperor Mines has decided to sell its 20 per cent stake in Barrick Gold's massive Porgera goldmine in Papua New Guinea after all.

Emperor's major shareholder, South Africa's DRDGold, said it had lined up a buyer for Emperor's best asset, which could be worth more than $US200 million ($258 million). Barrick and Harmony Gold are possible purchasers.

But as South Africa's MiningMX reported, analysts questioned why Porgera would be sold when it contributed significantly to DRD's - and therefore Emperor's - valuation.

DRD chief executive John Sayers replied the cheapest reserves were those that were 100 per cent-owned. He added Porgera would soon require heavy capital expenditures for a deepening project which might not earn an appropriate return in DRD's book.

Emperor is also selling its closed Vatukoula goldmine in Fiji. Three final bidders reportedly met the Fijian Government last week, and Mr Sayers said one had been selected as the winner, although he could not say when the transaction would be completed. Emperor isn't expected to get much money for Vatukoula and its other Fiji tenements due to a host of liabilities associated with the mine's closure last December.

Once the Porgera stake and Vatukoula are sold, Emperor's only remaining producing asset will be its high-cost Tolukuma mine in PNG. Mr Sayers said Tolukuma, which has not received the cash in the past that would make it a viable mine, was a "playing card" in DRD's pack and it had received expressions of interest "at very reasonable values".

Monopoly on way out

Qantas's long-term grip on the Sydney-to-US route looked increasingly shaky over the weekend after the US and European Union agreed to a provisional open skies deal.

While the deal will not affect the route where Qantas makes 20 per cent of its profits, the breakthrough in talks between the US and EU is expected to trigger a growing call for governments worldwide to adopt open skies agreements.

With Canada recently spruiking its willingness to promote open skies agreements, and the EU and US now joining the party, governments appear to be heeding the argument that the opening up of air routes to more airlines stimulates airline competition and tourism. The old argument for governments to protect their national carrier appear to be fading.

The EU argues the agreement, yet to be ratified on both sides of the Atlantic, could create 80,000 jobs and EUR12 billion ($20.3 billion) in economic benefits. A report by the Pacific Asia Travel Association last year argued that opening up of 320 of the world's "most restrictive" air routes would generate 24.1 million jobs and $US490 billion.

With ASEAN expected to draft some form of an open skies agreement by the end of this decade, Australia could come under increased pressure to open up Qantas's golden Los Angeles route to competitors such as Singapore Airlines.

© 2007 Sydney Morning Herald

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