Promising start to new financial year

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Despite violent rioting in the streets, the Greek Parliament last week passed the austerity measures which have reduced the threat of an immediate sovereign debt default.

This is a typical case of kicking the can down the road, with the European Union seemingly delaying the inevitable for at least another 12 months.

Promising to rein in government spending like the Greeks have done, and actually executing the plan against a public backlash, are two different things, but we’ll have to wait a while to see the results.

But the stockmarket has had a relief rally on the back of this news, and with the weight of tax loss selling being lifted post June 30, it’s been a positive start to the new financial year.

Last week we were waiting with baited breath for Murchison Metals’ announcement on the cost and delivery schedule for the Oakajee port and rail project.

It appears the analysts were spot on with this one, with official numbers from Murchison showing a capital cost for the Oakajee project of $5.94 billion and first shipping through Oakajee targeted for 2015.

The shipping schedule assumes a project go ahead in the March quarter of 2012, and this in turn depends on Murchison Metals and its joint venture partner, Mitsubishi, securing funding for the project and potentially securing another foundation customer after Sinosteel delayed its Weld Range iron ore project last week.

As with any large infrastructure project there are a lot of hoops to jump through before Oakajee gets off the ground, so this will be an ongoing story we will be following closely.

Still on all things iron ore, in May this column touched on the all-scrip takeover bids by Hong Kong limousine company Wah Nam International Holdings Ltd for Pilbara explorers Brockman Resources (BRM) and FerrAus (FRS).

FerrAus appears to have escaped the clutches of Wah Nam by entering into a consolidation agreement with Atlas Iron. Atlas is the fourth largest iron ore producer in Australia after Rio, BHP and FMG, and over the last couple of years has been steadily accumulating iron ore explorers, including Warwick Resources in 2009 and Giralia Resources earlier this year.

In the case of Brockman Resources, Wah Nam has now become a majority shareholder with a 55 per cent stake.

Brockman will continue to be listed on the ASX and operate as such with a focus on developing its Marillana iron ore project, while Wah Nam has added two executives to the Brockman board.

This is a good result for Brockman’s Australian-based shareholders who did not want to end up with Wah Nam shares that are listed on the Hong Kong Stock Exchange, which would have happened had they accepted the Wah Nam proposal.

Brockman shareholders still need to be careful, though, because they are minority shareholders in a company, and hence Wah Nam is in a position to direct Brockman as it sees fit.

Traders of Brockman will also see a reduced liquidity as fewer shares are actively traded on the market.

Information contained in this article does not consider your personal circumstances. You should consult a stockbroking professional before making any investment decisions. Sentinel may hold positions in stocks discussed from time to time.

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