Falling commodity prices hit resources states

Falling commodity prices and a rising dollar threaten to wipe almost $2 billion from the West Australian and Queensland budgets, plunging the resources growth engines into deficit, according to the Australian Financial Review.

NSW and South Australian revenues will also take a large hit, due to weaker than expected royalty streams, and the rest of the nation will be caught up in the downswing as the size of the pool of GST revenue shrinks.

Analysis by the AFR has found a rapidly deteriorating iron ore price and stronger than expected exchange rate will leave WA with an almost certain deficit in 2012-13, despite forecasts of a $196 million surplus.

Rushed carbon permit auction to prop up budget

The federal government plans to bolster its sagging budget bottom line by a near tripling of the auction of carbon emissions permits in 2013-14, according to the AFR.

Draft changes released over the weekend, and designed to legislate for last week’s scrapping of the carbon floor price, reveal that the government will increase the number of carbon permits available for auction from 15 million to up to 40 million.

With the May budget projecting a paper-thin surplus in 2013-14 of $2 billion, an additional $375 million in revenue from forward permits – based on a price of $15 per tonne of carbon – would help counterbalance falling iron ore prices and rising expenditure commitments.

Orica weighs $1B Minova sale

Orica is understood to be considering the sale of Minova, which sells items such as steel bolts and resin capsules used in ground support systems, according to the AFR.

Sources said Orica had approached potential buyers, and an information memorandum was being prepared to formally consider a sale. Independent adviser Lazard is thought to be involved.

Minova, which makes up about 13% of Orica’s revenue, is worth $1 billion to $1.3 billion according to analysts. RBS values it at 7.6 times one-year forward EBITDA, while JPMorgan says it is worth 10.3 times EBITDA.

Either valuation would make Minova a lower quality business than Orica’s mining services unit and higher quality than its chemicals business.