The world’s biggest copper mine, Escondida, is still months away from producing at full capacity despite a strike ending there almost one month ago. In bad news for Escondida’s biggest shareholders, BHP Billiton and Rio Tinto, it could be July before the mine reaches full production, exacerbating a financial year that has been dominated by interruptions to their copper mines. The restart schedule is much slower than most pundits had expected after a 43-day strike ceased on March 24; the industrial action was a major factor in Rio reporting its weakest quarterly copper output in 17 years yesterday.
Commonwealth Bank of Australia (CBA); Westpac Banking Corp (WBC):
Australian bank share prices are failing to factor in the prospect of a future slowdown in home lending and the build-up of housing risks, say the sector’s leading analysts. Citigroup and Morgan Stanley’s researchers have branded the recent crackdown in home lending as ‘‘unprecedented’’, ‘‘material’’ and likely to ‘‘fundamentally alter’’ the financial landscape. They predicted a slowdown in lending that would weigh on the long-term earnings of banks, even if home loan repricing gave the lenders a short-term boost. In a research note this week, Citi analysts, led by Craig Williams, said the ‘‘unprecedented approach to the provision of finance to housing is expected to have a material, multi-dimensional impact on the banking sector.’’
Evolution Mining Limited (EVN):
The economic interest Evolution Mining acquired in Glencore’s Ernest Henry copper and gold mine has helped the company cement its place among the world’s lowest cost producers of the precious metal. Evolution’s all-in sustaining cost, which includes production as well as royalties and other business expenses, slid 7 per cent to $840 an ounce in the three months to March, a record low for the company. ‘‘This equates to a $US637 per ounce all-in sustaining cost and makes Evolution one of the lowest cost gold producers in the world,’’ executive chairman Jake Klein said on a call with analysts.
Harvey Norman (HVN); JB Hi-Fi Limited (JBH); Super Retail Group Limited (SUL):
Loyalty programs, data analytics and in-store experiences will become the weapons of choice as Australian retailers fight to protect sales and earnings from online retail behemoth Amazon. Retailers have stepped up their defence preparations after Amazon confirmed retailers’ worst fears this week, unveiling plans to roll out its full retail offering in Australia over the next few years. According to a recent Commonwealth Bank survey, hundreds of retailers believe Amazon’s entry will not affect their business and remain unprepared, but major retailers say they have been anticipating Amazon’s arrival and have plans in place to defend their turf. ‘‘It’s something all retailers face, this is not something that’s come out of the blue,’’ said Super Retail Group chief executive Peter Birtles.
Tabcorp Holdings Limited (TAH):
It’s day three in the $7 billion battle for Tatts Group (Mk II), and it’s time to talk about synergies. Synergies are front of mind for Tatts’ institutional shareholders as they weigh Tabcorp’s mostly scrip bid up against a $4.21all-cash proposal from Johnny come-lately, the Pacific Consortium. It’s no secret companies can be guilty of overestimating synergies at the time of a takeover. Fund managers know it, bankers rarely want to talk about it and boards are constantly reminded to watch out for it. Tabcorp expects at least $130 million a year in synergies at the EBITDA line should it combine its business with Tatts’ wage ring arm, UBET. That represents cost synergies from wage ring yield improvement in UBET, as well as head office costs, IT savings and the like.
Wesfarmers Limited (WES); Woolworths Limited (WOW):
Confirmation that e-commerce giant Amazon will enter the Australian market over the next few years has caused the share prices of Australian retailers to slide. On Thursday, despite a broadly positive sentiment across the share market, investors turfed Harvey Norman and Myer, which fell 3.4 per cent and 2.6 per cent respectively. Electronics retailer and market darling JB Hi-Fi shed 1.8 per cent. Woolworths and Wesfarmers were broadly flat.