March quarter returns a mixed bag

GOING by the numbers, the WA resources industry’s March quarter was steady as she goes, with revenue and production growth very much in line with predictions.

Then again, very little of the sector’s news slid neatly into the rows and columns dedicated to bookkeeping, as a number of big stories spilled into the headlines.

The industry’s usual swings and roundabouts were evident, with the flagging Australian dollar helping exports, but capital infrastructure purchases, price hedging and higher fuel costs combining to soften profits.

Gold producers who hedged could not reap the benefit of good Australian dollar prices, but others, selling at prices above A$450 for three consecutive months, found themselves paying $12 per ounce royalties instead of the regular $5.60 per ounce.

However, Sons of Gwalia reported increased gold production worth a potential cash margin of $35 million for the period, and record tantalum production and sales.

Companies with energy interests again returned excellent figures from improved coal prices and continuing inflated oil and gas prices.

Woodside Petroleum reported record sales of $607 million, Wesfarmers significantly improved its bottom line from coal and LP gas export revenues, while Tap Oil increased its production and sales revenues by 54 per cent and 37 per cent respectively.

Encouraging production and revenue figures were not the major news for all resources companies, however, with corporate activity in some companies revealing little of the status quo.

While some decided to abandon resources for potentially larger profits in biotechnology applications, others faced administration, fought off unsolicited takeover bids, or talked serious asset transfers and interest mergers in the face of globalisation.

Anaconda Nickel became embroiled in a bid by shareholder Anglo American to clean out its executive management and most non-executive directors, while also continuing an arbitration process with Fluor.

‘Trouble’ appeared the main trend in nickel industry news, with receivers and managers appointed to Centaur Mining and Exploration.

Woodside Petroleum poured corporate resources into a vigorous defence against Shell’s unwelcome controlling interest bid, while BHP struggled with workforce and proposed merger issues and Western Australian Diamond Trust, subsequently acquired by Rio Tinto, lamented “deteriorating market conditions for diamond sales”.

Defiance Mining, Exodus Minerals and Britannia Gold assessed promising pharmaceutical and medical projects against their resources interests and have subsequently decided to abandon the sector. Exodus underscored its move, appointing biopharmaceutical expert and entrepreneur Roger Aston and cancer research specialist Robyn Ward to its management team, while Britannia suspended trading on March 26 for a period of seven weeks.

Norwest Energy bravely faced disaffected shareholders, presenting a post mortem on the Puffin 6 let down. “Puffin 6 was a fairly aggressive step-out,” chief executive officer Ivan Burgess admitted.

While Hancock Mining and Prospecting continued the chase to recover funds, several companies focused on pre-production activities or overseas interests.

Helix Resources continued drilling its Munni Munni platinum prospect near Karratha, which is set to become Australia’s first platinum mine.

Matrix Oil went on a fundraising spree, acquiring US$24.5 million to finance the Langsa oilfield project in the Malacca Straits. Amity Oil fast-tracked its major Gocerler gas field development and production project in Turkey, while awaiting surface equipment approval to drill the South West Whicher Range project, using a technique unique to such levels. The company also continued to wait for Native Title issues to be resolved in its northern Perth Basin and Bonaparte Basin interests.

Heron Resources was more fortunate, able to sign off on Native Title agreements for three nickel leases. However, it also waited, hoping the company’s plan to process ore at Centaur’s Cawse mine would not be upset by the Centaur Nickel outcome.

Newly listed Barra Resources went on a drilling spree, fast-tracking plans to mine its First Hit gold prospect north west of Kalgoorlie and hitting gold in every hole at its Barra Riverina mine.

Amadeus Petroelum bid unsuccessfully for more US exploration and development interests but, at home, with newly allied Honeywell, assessed industry and renewable energy related prospects.

This quarter’s resources activities will not be all production and revenue talk, either, with Rio and Western Mining both touted as possible Anaconda bidders, and the Centaur wind-up on hold while Joseph Gutnick and others present alternatives.

The Chamber of Commerce and Industry, Industry and Resources manager, Bill Sashegyi, believes the status quo may be changed in future quarters by a number of recent key developments.

The BHP Billiton merger is one to watch, he said. Petroleum is WA’s largest industry and BHP is a partner with Shell and Woodside in the North West Shelf and Timor Sea ventures. Oil and gas interests formed 14 per cent of BHP’s net operating assets for the year to December 2000 and a BHP Petroleum spokesperson said the merger provided growth opportunities for the company’s oil and gas interests, considered a key part of the merged portfolio.

BHP was the first company to offer a ‘white knight’ alternative to Shell’s bid for control of Woodside Petroleum and is understood to be continuing talks with the NWS operator. With Woodside’s gas find in the offshore Otway Basin this week, both companies are potential competitors in eastern states markets.

Meanwhile BHP-Billiton has announced it will spend A$16 billion on new growth projects in the next two years, and while BHP chairman Don Argus has not ruled out copper and nickel talks with Western Mining, WMC’s association with Alcoa is thought to preclude a takeover bid by BHP-Billiton.

A promised new look at workplace agreements by the State Government also could spell change for much of the resources sector, while uncertainty regarding the advancement of the Kyoto agreement is unsettling for downstream processors planning emissions control.

Carbon dioxide emissions are an issue for a Shell consortium, impatient to develop the Gorgon gas fields near Barrow Island, but hampered by the 20 per cent concentration of carbon dioxide, a level requiring expensive reduction or offset processes.

Last week’s announcement by the State Government of deregulatory changes to gas and electricity generation and distribution, favoured access to renewable energy generators and an extension of the gas pipeline network to the south and east, undoubtedly will impact on industry exploration and development plans.