Investment Matters

Company News: South 32, HT&E and BHP

South32 has announced it will acquire Arizona Mining, owner of the Hermosa Project in Arizona, at a price of US$1.3bill (for 83% of the company’s share it does not already own).  Hermosa contains high grade base metals, including zinc, manganese and silver oxide.  South32 will be able to leverage knowledge from the quite similar Cannington mine (base metals mine in Queensland), and has built up knowledge about the Hermosa resource pre acquisition (including share ownership in Arizona Mining, financing of a feasibility study, and Board representation).  Additionally, as Cannington winds down its production over coming years, this development will provide a growth path for the future.

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Global (French-based) outdoor advertising company JC Decaux made a takeover offer for APN.  APN is the suitor for HT&E’s outdoor business, Adshel.  JC Decaux is unlikely to be able to take over a combined APN and Adshel, because of potential competition concerns about JD Deaux and Adshel being combined.  So APN essentially faced a choice between being taken over, or pursuing the takeover of the Adshel business and controlling their own destiny.  Today they in effect chose the latter when they upgraded their proposal to acquire Adshel, to $540mill (was $500mill).  It is proposed as part cash, part APN script.  We will review the offer and advise of further developments.

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BHP announced it is going to proceed with the South Flank iron ore development.  US$2.9bill of capex will be spent to replace the 80mtpa production from the Yandi mine, which is reaching the end of its economic life.

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Retirement operator and developer Aveo announced an upgrade to earnings guidance.  It has updated its underlying EPS (earnings per share) forecast for FY-18 from 20.4 cents to 21.6 cents.  It should be noted that EPS delivered for FY-17 was 18.9 cents, and thus Aveo is expected year-on-year earnings growth of 14.3%.  Positive contribution from the Newstead development in Brisbane was the driver of this week's upgrade.