bnd coal comment

Bandanna have 5 - 6 Indian groups doing DD now for a bid

Comment by Ivor Ries - E C & L baillieu



Commodities: Coal

Before they blew the lid off Fukushima you would have thought coal was about to run out of steam after the activity we saw toward the end of 2010. But since then numerous nuclear power stations have been deferred and you you'd have to say that in the next six to 12 months we will see an amazing frenzy of activity in coal and the gas. Anyone who has a coal mine for sale or a gas resource for sale is going to find bidders lining up around the block.

So what I'm talking about are some of these second-tier miners, who have proved-up resources and probably can't access the money they need to develop them. So we are talking about companies such as Bandana (BND), Guildford Coal (GUF) and Aston Resources (AZT). There will be more purchasers of Australian coal assets because those guys have to secure their resource; they can't be out there punting.

The other bid mystery in there, of course, is Wesfarmers (WES). With all this demand for coal assets, the big question everyone wants to know is whether CEO Richard Goyder will cash in his coal division because he could get billions for it at an absolutely stunning price and effectively make his business debt-free. Richard if you want a tip from me: TAKE THE MONEY!


Commodities: Gas

The same goes for the gas players. There has been a wave of panic buying since Fukushima as everybody tries to cover their fuel exposures. This has moved gas up energy's pecking order and disrupted the way many investors had been looking at the sector.

For instance, there has been a theory around that there will be a merger between the big four Queensland LNG project developers: BG, Santos, Shell-PetroChina and Origin. That is looking less and less likely as the projects progress and become more costly to integrate.
What that means is that at least three of the four projects need to find additional sources of gas.

These developers are much bigger players than the mid-tier miners I mentioned earlier, but they are all coming up against the same constraints, be they cost pressures or bank managers. So if you're trying to get a final investment decision on a Gladstone gas project and the banks are saying you need another two trillion feet of gas then there are only a few places you can go: Bow Energy (BOW), Eastern Star Gas (ESG) and Metgasco (MEL).

They should have someone at their door very, very soon, saying, 'Hi, we want to buy your gas or if you won't sell us your gas, we want to buy your entire company'.