Thu Sep 6, 2012
* Peabody shelves Australian mine sale - sources
* Deals worth about $15 bln pulled so far this yr - bankers, lawyers
* Resources deal volumes at $29 bln, down 63 pct on 2011
By Narayanan Somasundaram
SYDNEY, Sept 6 (Reuters) - Almost $15 billion of resources deals in Australia have been delayed or derailed since January due to a sharper-than-expected decline in commodity prices and Chinese demand, with transactions set to hit their lowest level since 2009.
Overseas investors have stayed away from Australia's once booming energy and commodity sector as prices of coal, iron ore and other industrial materials sink to multi-year lows. The biggest casualties so far this year are the $5 billion failed privatisation of Whitehaven Coal Ltd and the $4.5 billion canned auction of New Hope Corp Ltd.
Peabody Energy Corp is the latest victim of the reduced appetite as the St Louis-based company defers the $500 million sale of its Wilkie Creek thermal-coal mine after almost a year on the market, two sources with direct knowledge of the sale said.
The mine failed to attract a worthwhile bid, two sources with direct knowledge of the sale said, asking not to be identified because the details were confidential.
A U.S.-based Peabody spokesman did not immediately respond to an email seeking comment outside office hours.
Among other deals likely to join the list of scrapped deals are Vale SA's $500 million Integra Mine in New South Wales and BG Group PLC's $2 billion stake sale in its Curtis liquefied natural gas project, three separate sources said, declining to be identified as they are not authorised to speak to the media.
A further $10 billion of potential deals were never pitched due to the deteriorating environment, according to bankers and lawyers.
A spokesman for Vale declined to comment on market speculation, while BG did not immediately respond to requests for comment.
Australian resources deals stand at $29.1 billion so far this year, or two-thirds lower than 2011, and are on course to hit a three-year low, according to Thomson Reuters data.
The data shows the last five years averaged volumes of $57 billion in resources deals.
The sharp slowdown in mining deals affects everything from exploration projects to stock prices to jobs at struggling junior miners thirsty for capital. It is further evidence that the seven-year boom in commodity prices that Australia has enjoyed may have turned a corner.
China, Australia's top trade partner, has notched six straight quarters of slower growth and its factory purchasing managers' index dropped to a nine-month low in August, sending commodity prices falling.
Benchmark iron ore prices have tumbled from a 2012 peak near $150 a tonne in April to below $90, hitting a near three-year low this week. Benchmark thermal-coal prices are at a 2-1/2 year low.
HOT BED NO LONGER
Just before the 2008 financial crisis, and not long after Asia recovered early the next year, Australia's mining market was a hot bed for M&A activity, with China a voracious buyer of Australian minerals projects.
Deals such as the sale of Macarthur Coal Ltd and Equinox Minerals Ltd were hotly contested affairs with dozens of bankers, lawyers and accountants poring over data rooms and multiple suitors forced to offer rich premiums.
This year started similarly, with strong interest in the assets put up by Vale, Peabody and BG. But that interest has now almost vanished.
Neither the BG or Vale deal will happen unless an "acceptable bid" emerges at the last minute, the sources said.
Last month, Chinese regulators forced Hanlong Group to cut a previously agreed deal for Australian iron ore miner Sundance Resources Ltd by a fifth to $1.4 billion, citing a weak share price and falling commodity prices.
PROLONGED SLUMP OR BLIP?
With deals drying up and share prices of miners tumbling to near record lows, the argument that cashed up companies and funds could scoop a bargain leading to a revival in deals volume like the period after 2009 gains some credence.
Japanese companies, helped by a strong yen, could feature in any revival, especially with Chinese and Indian companies less active.
Deals by Chinese companies have shrunk to $522 million so far this year, less than a tenth of the amount a year earlier, with bankers and lawyers saying Chinese companies are no longer eager participants in auctions.
"The current downturn in the commodity market is more severe than that of the post-Lehman crisis in that China's slowdown has now become visible," said a senior official at a top Japanese trading house.
"The momentum changed about six months ago, and since then, we've been having more offers for resources assets. We are planning to buy if there are good ones," said the official, who declined to be identified because he was not authorised to speak to the media.
Japan's Marubeni Corp earlier this year agreed to buy a 12.5 percent stake in the Roy Hill iron ore project for A$1.5 billion. Mitsui & Co Ltd and Mitsubishi Corp acquired a 14.7 percent stake in Woodside Petroleum Ltd's Browse LNG project.
* Peabody shelves Australian mine sale - sources
* Deals worth about $15 bln pulled so far this yr - bankers, lawyers
* Resources deal volumes at $29 bln, down 63 pct on 2011
By Narayanan Somasundaram
SYDNEY, Sept 6 (Reuters) - Almost $15 billion of resources deals in Australia have been delayed or derailed since January due to a sharper-than-expected decline in commodity prices and Chinese demand, with transactions set to hit their lowest level since 2009.
Overseas investors have stayed away from Australia's once booming energy and commodity sector as prices of coal, iron ore and other industrial materials sink to multi-year lows. The biggest casualties so far this year are the $5 billion failed privatisation of Whitehaven Coal Ltd and the $4.5 billion canned auction of New Hope Corp Ltd.
Peabody Energy Corp is the latest victim of the reduced appetite as the St Louis-based company defers the $500 million sale of its Wilkie Creek thermal-coal mine after almost a year on the market, two sources with direct knowledge of the sale said.
The mine failed to attract a worthwhile bid, two sources with direct knowledge of the sale said, asking not to be identified because the details were confidential.
A U.S.-based Peabody spokesman did not immediately respond to an email seeking comment outside office hours.
Among other deals likely to join the list of scrapped deals are Vale SA's $500 million Integra Mine in New South Wales and BG Group PLC's $2 billion stake sale in its Curtis liquefied natural gas project, three separate sources said, declining to be identified as they are not authorised to speak to the media.
A further $10 billion of potential deals were never pitched due to the deteriorating environment, according to bankers and lawyers.
A spokesman for Vale declined to comment on market speculation, while BG did not immediately respond to requests for comment.
Australian resources deals stand at $29.1 billion so far this year, or two-thirds lower than 2011, and are on course to hit a three-year low, according to Thomson Reuters data.
The data shows the last five years averaged volumes of $57 billion in resources deals.
The sharp slowdown in mining deals affects everything from exploration projects to stock prices to jobs at struggling junior miners thirsty for capital. It is further evidence that the seven-year boom in commodity prices that Australia has enjoyed may have turned a corner.
China, Australia's top trade partner, has notched six straight quarters of slower growth and its factory purchasing managers' index dropped to a nine-month low in August, sending commodity prices falling.
Benchmark iron ore prices have tumbled from a 2012 peak near $150 a tonne in April to below $90, hitting a near three-year low this week. Benchmark thermal-coal prices are at a 2-1/2 year low.
HOT BED NO LONGER
Just before the 2008 financial crisis, and not long after Asia recovered early the next year, Australia's mining market was a hot bed for M&A activity, with China a voracious buyer of Australian minerals projects.
Deals such as the sale of Macarthur Coal Ltd and Equinox Minerals Ltd were hotly contested affairs with dozens of bankers, lawyers and accountants poring over data rooms and multiple suitors forced to offer rich premiums.
This year started similarly, with strong interest in the assets put up by Vale, Peabody and BG. But that interest has now almost vanished.
Neither the BG or Vale deal will happen unless an "acceptable bid" emerges at the last minute, the sources said.
Last month, Chinese regulators forced Hanlong Group to cut a previously agreed deal for Australian iron ore miner Sundance Resources Ltd by a fifth to $1.4 billion, citing a weak share price and falling commodity prices.
PROLONGED SLUMP OR BLIP?
With deals drying up and share prices of miners tumbling to near record lows, the argument that cashed up companies and funds could scoop a bargain leading to a revival in deals volume like the period after 2009 gains some credence.
Japanese companies, helped by a strong yen, could feature in any revival, especially with Chinese and Indian companies less active.
Deals by Chinese companies have shrunk to $522 million so far this year, less than a tenth of the amount a year earlier, with bankers and lawyers saying Chinese companies are no longer eager participants in auctions.
"The current downturn in the commodity market is more severe than that of the post-Lehman crisis in that China's slowdown has now become visible," said a senior official at a top Japanese trading house.
"The momentum changed about six months ago, and since then, we've been having more offers for resources assets. We are planning to buy if there are good ones," said the official, who declined to be identified because he was not authorised to speak to the media.
Japan's Marubeni Corp earlier this year agreed to buy a 12.5 percent stake in the Roy Hill iron ore project for A$1.5 billion. Mitsui & Co Ltd and Mitsubishi Corp acquired a 14.7 percent stake in Woodside Petroleum Ltd's Browse LNG project.
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