1. MARCH 2011
Gresham Group 150
March 2011
Darren Martin
Gresham Advisory Partners
dmartin@gresham.com.au
+61 8 9486 7077
+61 412 144 719
ASX RESOURCES - GROUP 150
We are pleased to present the March edition of ‘Group 150’, a ranking of the top 150 ASX listed resources companies (excluding
oil and gas), by market capitalisation.
February recorded the Group 150 recapture of the decline in cumulative market value witnessed in January, up 2.8% to 605.4
billion. The entry point into the Group 150 was extended in February to $138.1 million from $127.7 million for January. The ASX/
S&P 200 Resources Index increased 3.4% for the month, significantly outperforming both the ASX All Ordinaries and ASX/S&P
200 Index which increased 1.5% and 1.6% respectively.
Four M&A transactions were announced during the month with base metals being the current focus, supported by Independence’s
offer for Jabiru and Equinox’s offer for Lundin Mining. Following the upbeat and positive predictions made at Indaba, we expect
to see an increased level of activity in the coming months. A straw poll amongst some of the 5,000 delegates appeared to favour
gold, iron ore and copper as the preferred commodities.
“Winners” for February (in terms of growth in market capitalisation) were : Cobar (+76.4%), Atlas Iron (+72.5%), South Boulder
(+72.1%), Papillon (+61.1%) and Carabella (+48.9%).
In this edition, we provide the results of our study on the current gearing levels of the Group 150 companies.
Capital structuring and, in particular, locating the optimal capital structure, have for a long time been a focus for many an
academic and financial institution that probe this area. In recent years, the role of financial management has undergone a
significant change. The ownership structure, size of companies, equity / debt markets, financial systems and instruments have
advanced significantly in a technology driven dynamic environment. As a result, the role of management has become far more
important than merely a fund raiser.
Management is expected to maximize the economic welfare of the owners, represented by the market value of the firm and
faces competition from interests seeking short term share price appreciation versus long term growth. To achieve this objective,
one has to take a number of decisions, the most important being the investment, financing and dividend decisions.
Testing the thesis “cash is king and debt is bad” we observed 80% of the Group 150 were in a net cash position at 31 December
2010 and the weighted average gearing level was negative 2.6%, when measured on a net debt to enterprise value basis.
Interestingly, companies with a domestic focus are in a stronger net cash position than peers with overseas focussed operations.
We look forward to seeing you at Mines and Money in Hong Kong at the end of the month.
Gresham Advisory Partners Limited
Gresham Advisory Partners is a leading Australian mergers and acquisitions/corporate advisory
Edition 12 business and one of Australia’s largest and highest ranking independent corporate advisors.
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4. Group 150
Group 150 markeT capiTaLisaTion asX indeX perFormance - February
Group 150 secTor markeT capiTaLisaTion - February
Market Capitalisation (A$b)
merGer & acquisiTions - announced in February
Percent Premium - Premium -
Date Value Consideration
Target Acquirer Sought 1 Day Prior 1 Month Prior
Announced (A$m) Offered
(%) (%) (%)
28-Feb-2011 Lundin Mining Corp (TSX:LUN) Equinox Minerals Ltd. (ASX:EQN) 4,785.8 100 25.6 11.1 Elections
22-Feb-2011 White Canyon Uranium Ltd. (ASX:WCU) Denison Mines Corp. (TSX:DML) 49.7 100 20.0 71.4 Cash
7-Feb-2011 Aragon Resources Ltd. (ASX:AAG) Westgold Resources Limited (ASX:WGR) 63.2 80 35.4 27.5 Equity
20-Jan-2011 BC Iron Limited (ASX:BCI) Regent Pacific Group Ltd (SEHK:575) 258.7 80.13 4.1 27.9 Equity
Source: Capital IQ
Announced Australian Resources (excluding oil and gas) Mergers and Acquisitions >A$10m
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5. MARCH 2011
capiTaL sTucTure - GearinG LeveLs
Optimising Capital Structure to Improve Shareholder Value
Capital structuring and, in particular, locating the optimal capital structure, have for a long time been a focus for many an academic
and financial institution that probe this area. Academically, the problem is appealing because it is fairly open ended and subject to
controversies and criticisms.
In recent years, the role of financial management has undergone a significant change. The ownership structure, size of companies,
equity / debt markets, financial systems and instruments have advanced significantly in a technology driven dynamic environment. As
a result, the role of management has become far more important than merely a fund raiser.
Management is expected to maximize the economic welfare of the owners, represented by the market value of the firm and faces
competition from interests seeking short term share price appreciation versus long term growth. To achieve this objective, one has to
take a number of decisions, the most important being the investment, financing and dividend decisions.
Below is a summary of the gearing levels of the Group 150. As at 31 December 2010, 80% of companies were in a net cash position,
with the weighted average gearing level being negative 2.6%. Interestingly, companies with a domestic focus are in a stronger net cash
position than peers with overseas focussed operations.
Gearing (Net Debt /Enterprise Value)
Group 150 Mining Companies – by Market Capitalisation
NET DEBT
Net Debt / Enterprise Value
NET CASH
80% in net cash position
Source: Capital IQ
Based on Net Debt at 31 December 2010
5
6. Group 150
capiTaL sTucTure - GearinG LeveLs
Net Debt /Enterprise Value
Group 150 Mining Companies – by Market Capitalisation
NET DEBT
NET CASH
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7. MARCH 2011
base meTaLs - secTor perFormance
Share Price Performance - February 2011
Copper Nickel Zinc
Share Price Performance
Share Price Performance - Since 31 December 2010
Share Price Performance
Share Price Performance - Since 30 June 2010
Share Price Performance
7
8. Group 150
coaL - secTor perFormance
Share Price Performance - February 2011
Share Price Performance
Share Price Performance - Since 31 December 2010
Share Price Performance
Share Price Performance - Since 30 June 2010
Share Price Performance
8
9. MARCH 2011
diversiFied - secTor perFormance indusTriaL mineraLs - secTor perFormance
Share Price Performance - February 2011
Share Price Performance
Share Price Performance
Share Price Performance - Since 31 December 2010
Share Price Performance
Share Price Performance
Share Price Performance - Since 30 June 2010
Share Price Performance
Share Price Performance
9
10. Group 150
GoLd - secTor perFormance
Share Price Performance - February 2011
Share Price Performance
Share Price Performance - Since 31 December 2010
Share Price Performance
Share Price Performance - Since 30 June 2010
Share Price Performance
10
11. MARCH 2011
iron ore - secTor perFormance
Share Price Performance - February 2011
Share Price Performance
Share Price Performance - Since 31 December 2010
Share Price Performance
Share Price Performance - Since 30 June 2010
Share Price Performance
11
12. Group 150
uranium - secTor perFormance
Share Price Performance - February 2011
Share Price Performance
Share Price Performance - Since 31 December 2010
Share Price Performance
Share Price Performance - Since 30 June 2010
Share Price Performance
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14. recenT resources TransacTions
Group 150
Mergers and Acquisitions
Mergers and Acquisitions
2010 2009
GRAM
2009 2009 2008 2008 2006
Advised BHP Advised BG Advised Guandong Advised Allied Gold Advised Kalahari Advised Gem Advised IAMGOLD
Billiton on its Group on its $1bn Rising on its $216m on its $54m Minerals on its Diamonds on its Corporation on its
$204m offer for takeover offer for cornerstone acquisition of $140m proposed $300m acquisition $265m acquisition
United Minerals Pure Energy investment in Pan Australian merger with of Kimberley of Gallery Gold.
Corporation. Resources Aust. Solomons Gold. Extract Resources. Diamonds.
Limited.
TakeoverDefence
Takeover Defence
2010 2010 2010 2009 2009 2007 2007
Advised Polaris Advised Indophil Advised Advised Energy Advised Brandrill Advised Summit Advised Tethyan on
Metals NL on on $545m Centaurus Metals on its $86m Limited on its Resources on its its $220m
$178m takeover recommended Resources on its proportional takeover $45m takeover A$1.2bn takeover competing takeover
offer by Mineral offer from Zijin $20m merger offer by China offer by Ausdrill by Paladin Energy. offer by Crosby and
Resources with Glengarry Guangdong Nuclear Limited. Antogafasta/Barrick.
Limited. Resources. Power Group.
Strategic Advisory, JointJoint Ventures and Capital Markets
Strategic Advisory, Ventures and Capital Markets
2010 2010 2009 2008 2009/08 2008 2008
Advised BHP Introduced Advised BHP Advised Advised Iluka on its Advised Advised Iluka
Billiton on its Denham Capital to Billiton on the Bannerman $114m Murchison Metals Resources on its
US$116bn iron Trans Tasman disposal of the Resources on its institutional on its joint venture $54m Narama coal
ore production Resources resulting Yabulu Nickel financing with placement and with Mitsubishi. divestment to
joint venture with in NZ iron sands refinery. Resource Capital $353m accelerated Xstrata.
Rio Tinto. investment. Funds. right issue.
Gresham Advisory Partners Limited
A.B.N. 97 003 344 269
Level 17, 167 Macquarie Street, Level 10, 1 Collins Street, Level 3, 28 The Esplanade,
Sydney NSW 2000 Melbourne VIC 3000 Perth WA 6000
Telephone: 61 2 9221 5133 Telephone: 61 3 9664 0300 Telephone: 61 8 9486 7077
Facsimile: 61 2 9221 6814 Facsimile: 61 3 9650 7722 Facsimile: 61 8 9486 7024
Website: www.gresham.com.au
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