News Wrap

IN THIS morning’s wrap: Tinkler walks Whitehaven tightrope; yuan deal may lower trade costs; and analysts bearish on resources outlook.
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Nathan Tinkler

Lou Caruana

Tinkler walks Whitehaven tightrope

Nathan Tinkler’s planned $5 billion tilt at Whitehaven Coal is now said to be best described as a “touch and go” situation, according to the Australian Financial Review.

The 18% plunge in the share price over the last week is a sign many investors are convinced he is backing away from the planned offer. But the word in the market is he is still trying very hard to get a deal together and has not abandoned plans.

Keeping in mind Tinkler’s sizeable personal debts, some think there is still obvious motivation for creditors such as Farallon Capital Partners to back his planned takeover of Whitehaven lest they be unable to recoup the amount already lent at high interest rates.

On balance, some think Tinkler will still be able to get a deal done – although given deteriorating coal market conditions and the downward spiral in the Whitehaven share price, the price is less clear.

The leverage involved in Tinkler’s takeover plans makes his ability to get a deal done dependent on lenders’ view of the earnings potential of the assets following a due diligence process.

Whitehaven shares closed 27¢ lower at $3.53 yesterday, a far cry from the original $5-plus price mooted for his bid.

Nomura analyst David Cotterell thinks shares could fall below $3 if no formal takeover offer eventuates.

Yuan deal may lower trade costs

Importers and mid-tier miners are likely to be the main beneficiaries of further liberalisation of the yuan, according to the Australian Financial Review.

The chief executive of international and institutional banking at ANZ Alex Thursby said reforms might allow Australian companies to finance their operations in yuan and further encourage them to settle trade contracts in the currency.

“We welcome this initiative which may lead to further liberalisation of the yuan, which will happen faster than many expect,” Thursby said.

Treasurer Wayne Swan announced an agreement on Wednesday with the Hong Kong government, which will help Australian ambitions to become an offshore trading hub for the yuan.

The agreement will establish a dialogue between bankers and business people in the two countries, facilitated by the Hong Kong Monetary Authority, the Reserve Bank of Australia and Treasury.

Swan will push for direct trading rights when he meets with China’s central bank governor, Zhou Xioachuan, in Beijing today.

Analysts bearish on resources outlook

Credit Suisse has revised down most commodity price forecasts, including those of most importance to the Australian economy: iron ore, thermal coal and coking coal, according to the Sydney Morning Herald.

"While commodity prices will remain well above the average of recent decades, it is likely that many have peaked for this cycle," said the Credit Suisse analyst note, led by Paul McTaggart.

But importantly for the local economy, the bank suggested that iron ore was one commodity that would yet enjoy higher prices.

Despite downgrading its own iron ore price forecasts by 9%, 8% and 5% over the three years from this year, Credit Suisse still expects benchmark iron ore prices to reach $US150 a tonne by mid-2013, well above yesterday's price of $136 a tonne.

Dispelling suggestions of a sustained crash in iron ore prices, the bank is predicting a benchmark iron ore price of $128 a tonne in 2014.