Now the Indians are coming for our coal
Sydney Morning Herald
Monday August 17, 2009
YOU don€™t expect success when you invite your neighbour in for some drinks and offer him half price for his house.That is prettymuch what Gujarat NRE Minerals (ASX:GNM) is planning to do thisweek with shareholders in its takeover target, Rey Resources (ASX:REY).Rey shareholders have been invited to TheWestin Sydney on Wednesday for a bit of a chat over someKingfisher beers and poppadams on the outlook for Gujarat, the ASX-listed subsidiary of the Indian coke producer Gujarat NRE Coke, and its bid forRey.Garimpeiro€™s advice to Gujarat is to not over-cater for the event, given its cash/scrip takeover bid for Rey is so far under water it is not funny. Gujarat is offeringeither 9c a share cash or one of its shares (trading at 65c) for every five Rey, an imputed value of 13c a share. Trouble is, Rey is trading at 17.5c and has told shareholders to reject Gujarat€™s bid in capital letters.So why call in Rey shareholders for a chat? Could it be that Gujarat €“ it has a 16.6 per cent Rey shareholding €“ has a surprise in store for Rey shareholders beforeWednesday€™s gathering? The only surprise Rey shareholders want is a more realistic bid.Rey€™s attraction to Gujarat and its Indian parent is its Canning Basin steaming coal project in Western Australia€™sKimberley.Rey has already outlined a 500 million tonne resource at its Duchess Paradise property. Further exploration is likely to result in a resource that is a multiple of that maiden resource estimate. India is a big coal producer in its own right but it is getting worried that rising power consumption, a function of rising living standards, is going to leave it short about 200 million tonnes a year from 2012.The Canning Basin resource of Rey could be part of the solution, with the energy hungry Indian market only four days sailing from the Kimberley coast. So while the focus has been on the Chinese raid on the local resources sector, it has to be saidthat the Indians are coming too.Copper shinesThe stunning turnaround in copper prices in response to the easing of the global financial crisis has worked wonders on the share price ofMelbourne-basedIndophilResources (ASX:IRN), a partner in the Xstrata-managed Tampakan copper/gold deposit in the Philippines.The stock put on another 5c on Friday to close at 67c, which is a far cry from the 21c a share low back in late January. Copper€™s 86 per cent rebound in the past six months from $US1.50 a pound to $US2.80 a pound has been the main driver.But some potential corporate action is also at work. Indophil has opened a data room for prospective buyers of its 34.23 per cent stake in Tampakan, one ofthe world€™s biggest undeveloped copper deposits.A number of tier one companies and sovereign investments funds have signedconfidentiality agreements to get access to the data room.While it will take time for any deal to be reached, it may well be worth the wait, given the sheer size of Tampakan, a likely $US5 billion development capable of producing 340,000 tonnes of copper and 350,000 ounces of gold annuallyformore than 20 years.Indophil€™s current market capitalisation values its share of Tampakan€™s riches at all of A2.2c a pound of copper in the ground.That is a fraction of the A7c a pound implied in recent copper asset deals elsewhere inthe world and the A20c apound that Xstrata €“ it has 62.5 per cent ofTampakan€“ is considering accepting for its interest in the El Morro copper project in Chile from Chinese interests.The Indophil chief executive, Richard Laufmann, is giving nothing away on the Tampakan sale process. But it€™s worth noting that Laufmann€™s new businesscards are double-sided affairs, English on one side and Chinese on the other.Gas guzzlersThe last time Garimpeiro had a look atMEOAustralia (ASX:MEO) it was trading at 14c a share. That was in June, when MEO had just opened a dataroom for theproposed farm-out of an interest in the offshore Carnarvon Basinexploration permit WA-360-P.That interest in the permit by a who€™s who of the world€™s oil and gas majors has been extreme explains why MEO€™s share price has since motored off to Friday€™sclosing price of 53.5c a share. MEO closed the dataroomon Friday, with 20 parties still in the race to strike a farm-in deal on the permit, which is adjacent to the Pluto (Woodside)and Wheat stone(Chevron) gasfields that underpin liquefied natural gas expansion plans in the region. There is no prize for guessing that both Woodside and Chevron have been in the data room as they both want to stitch up control of additional gas resources.Woodside wants more gas to expand its Pluto LNG processing plant at Karratha, and Chevron wants it for its proposed plant at Onslow.Before the data room closed, MEO disclosed that it had upgraded its estimate of the potential gas-in-place resource in WA-360-P from 9.5 trillion cubic feet of gas to more than 20 trillion cubic feet.That is a lot of gas. MEO wants indicative offers onthe table this monthand expects to have a farm-out completed by the end of next month. All that means we arenot far off from MEO announcing just which of the industry€™s big boys has secured a piece of WA- 360-P, as well as some firm dates on the permit€™s potential beingtested with the drill bit.Cheering MEO on are Cue Energy and an unlisted company owned by Geoff Albers, each with a 15 per cent stake in the permit.