1. OCTOBER 2011
Gresham Group 150
October 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 October edition of ‘Gresham Group 150’, a ranking of the top 150 ASX listed resources
companies (excluding oil and gas), by market capitalisation.
September felt like another month at “ASX Casino” with only 18 companies recording a positive increment on their market
value. The Gresham Group 150 lost $72.5 billion or 14.2% during the month, with the cumulative market value falling
from $509.8 billion to $437.3 billion, a level not seen while we have been compiling the Group 150. At the end of the first
week of October, approximately $33 billion had been recaptured with the cumulative market value climbing back to $470
billion.
The entry threshold for September’s list fell dramatically to $96.6 million, down from $111.2 million last month. The ASX/
S&P 200 Resources Index decreased 13.4%, while the ASX All Ordinaries and ASX/S&P 200 Index decreased 6.9% and 6.7%
respectively.
Given the turmoil in the market in recent months, we reviewed the thesis from the March 2011 edition, “cash is king and
debt is bad”. Utilising the recent 30 June balance sheets, we updated the market gearing levels for the Gresham Group 150
to identify any stretched balance sheets or dramatic changes in gearing levels.
The updated study found that consistent with previous findings, approximately 80% of companies still remain in a net
cash position and the weighted average gearing level has decreased marginally to circa 1.1% (versus 2.6% at March 2011),
when measured on a net cash to enterprise value basis.
During the relevant period the market value of the Gresham Group 150 has declined 28% from $605.4 billion at end of
February to $437.3 billion at 30 September 2011 and cash reserves have decreased by $9.2 billion from $42.7 billion to
$33.5 billion while total debt has increased $4.8 billion from $40.9 billion to $45.7 billion.
Returns at “ASX Casino” in October will be interesting. Having witnessed a couple of spins of the wheel from the US Federal
Reserve in response to rapidly deteriorating economic and financial conditions, it now appears the leaders of Germany
and France are going to have a spin and unveil a comprehensive package to recapitalise the European banks by the end
of October. Early indications (given market commentary around a possible offer for Extract) suggest the uranium sector
may hit the Jackpot!
Gresham Advisory Partners Limited
Gresham Advisory Partners is a leading Australian mergers and acquisitions/corporate advisory
Edition 19 business and one of Australia’s largest and highest ranking independent corporate advisors.
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4. Group 150
Group 150 markeT capiTaLisaTion
-6.4%
437.3
+21.5%
Market Valuation (A$b) - Group 150
asX indeX performance - sepTember Group 150 mkT cap - by commodiTy
merGer & acquisiTions - announced in sepTember
Percent Premium - Premium -
Date Value Consideration
Target Acquirer Sought 1 Day Prior 1 Month Prior
Announced (A$m) Offered
(%) (%) (%)
29-Sep-2011 Anvil Mining Limited (TSX:AVM) Minmetals Resources Limited (SEHK:1208) 1,282.0 100 38.2 34.7 Cash
Iron Ore Holdings Limited, Koodaideri South
27-Sep-2011 Hamersley Iron Pty Ltd 32.0 100 - - Cash
Tenement
20-Sep-2011 Mbila Resources (Pty) Limited ZYL Limited (ASX:ZYL) 26.1 44 - - Combinations
12-Sep-2011 Hunnu Coal Limited (ASX:HUN) Banpu Minerals (Singapore) Pte. Ltd. 420.2 88 30.0 45.8 Cash
9-Sep-2011 Pinnacle Group Assets Limited Cape Lambert Resources Limited (ASX:CFE) 15.0 10 - - Combinations
Source: Capital IQ
Announced Australian Resources (excluding oil and gas) Mergers and Acquisitions >A$10m
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5. OCTOBER 2011
capiTaL sTucTure - GearinG LeveLs
Changing gearing levels in a falling market
In the March 2011 edition, we reviewed the thesis “cash is king and debt is bad” based on the net cash position of the Gresham
Group 150 utilising market values at end of February adjusted for 31 December 2010 balance sheets.
Given the uncertainty in the markets in recent months, the analysis has been updated to account for the net cash position at
30 June 2011. During this time the market value of the Gresham Group 150 has declined 28% from $605.4 billion to $437.3
billion at 30 September 2011 and cash reserves have decreased by $9.2 billion from $42.7 billion to $33.5 billion while total debt
has increased $4.8 billion from $40.9 billion to $45.7 billion.
The study found that approximately 80% of companies still remain in a net cash position, consistent with previous findings, but
the weighted average gearing level has decreased marginally to circa 1.1% (versus 2.6% at March 2011), when measured on a
net cash to enterprise value basis.
In a change from March, the companies with overseas focussed operations are in a stronger net cash position than peers with
domestic focussed operations – refer next page. Below is a summary of the gearing levels of the Gresham Group 150.
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 30 June 2011
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6. Group 150
capiTaL sTucTure - GearinG LeveLs
Net Debt /Enterprise Value
Group 150 Mining Companies – by Market Capitalisation
NET DEBT
NET CASH
Source: Capital IQ
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7. OCTOBER 2011
base meTaLs - secTor performance
Share Price Performance - September 2011
Copper Nickel Zinc
Share Price Performance
Share Price Performance - Since 30 June 2011
Share Price Performance
Share Price Performance - Since 31 December 2010
50%
25%
11.4%
Share Price Performance
2.6%
0%
-5.0%
-7.4% -7.9%
-13.9%
-25% -20.3%
-22.4%
-25.4% -27.6%
Average - (13%)
-35.1%
-37.7% Average - (16%)
-40.6%-42.9% -41.0%
-50% -45.7%
-47.6% -50.0% -51.3% -50.6%
-55.6% -53.7%
-58.5% Average - (41%)
-63.9% -63.1%
-75%
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8. Group 150
coaL - secTor performance
Share Price Performance - September 2011
Share Price Performance
Share Price Performance - Since 30 June 2011
Share Price Performance
Share Price Performance - Since 31 December 2010
Share Price Performance
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9. OCTOBER 2011
diversified - secTor performance indusTriaL mineraLs - secTor performance
Share Price Performance - September 2011
Share Price Performance
Share Price Performance
Share Price Performance - Since 30 June 2011
Share Price Performance
Share Price Performance
Share Price Performance - Since 31 December 2010
Share Price Performance
Share Price Performance
9
10. Group 150
GoLd - secTor performance
Share Price Performance - September 2011
Share Price Performance
Share Price Performance - Since 30 June 2011
Share Price Performance
Share Price Performance - Since 31 December 2010
115%
Share Price Performance
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11. OCTOBER 2011
iron ore - secTor performance
Share Price Performance - September 2011
Share Price Performance
Share Price Performance - Since 30 June 2011
Share Price Performance
Share Price Performance - Since 31 December 2010
Share Price Performance
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12. Group 150
pLaTinum - secTor performance uranium - secTor performance
Share Price Performance - September 2011
Share Price Performance
Share Price Performance
Share Price Performance - Since 30 June 2011
Share Price Performance
Share Price Performance
Share Price Performance - Since 31 December 2010
Share Price Performance
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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