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Colin Lea
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The author is Australian with a long term interest and personal stake in financial planning and management. He works within the Financial Services Industry, is a member of the FPA Australia, and is a Certified Gold Seeking Alpha Contributor. Prior professional background of 20 years in military... More
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Carey Group of Companies
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  • Fortescue Gets $4.3b Lifeline, Shares Soar

    Article from Sydney Morning Herald:

    Shares in Fortescue Metals have soared after the iron ore miner was handed a $4.26 billion lifeline by its creditors, which will delay its earliest debt repayments until November 2015.

    The iron ore miner this morning announced a commitment for a senior secured credit facility of up to $US4.5 billion from backers Credit Suisse and JP Morgan. The deal gives the troubled miner more time to manage its $US9 billion in debts, as the outlook for iron ore grows less certain.

    The miner's shares rose as much as 51 cents, or 17.1 per cent, to $3.50 in early trade.

    "This facility will be used to refinance all existing bank facilities and provide Fortescue with additional liquidity," the company said.


    "The facility extends the earliest repayment date for any of the company's debt to November 2015 and removes financial maintenance covenants which applied under previous facilities," the company said, noting that Credit Suisse and JP Morgan both signed a full underwriting commitment for the facility that provided "funding certainty to Fortescue".

    Perth-based Fortescue also flagged potential partial sales of assets to a range of interested partners in order to strengthen the company's balance sheet.

    "Fortescue is currently evaluating these approaches," the company said. "Transactions of this nature are not required under Fortescue's new debt facilities and will only be pursued if they clearly add shareholder value."

    Fortescue shares were placed into a trading halt on Friday morning after its stock plunged the day before on revelations that the company was in talks with its creditors to renegotiate its debt covenants. The company's stock closed 48 cents lower, or 13.8 per cent, to $2.99 on Thursday.

    Job cuts

    The iron ore miner has cut $300 million from its costs and laid off 1000 staff in recent weeks in response to softer demand from Chinese steelmakers. Fortescue, with debts of $9 billion, requires iron ore to remain at $US110 per tonne or higher in order to cover repayments to its backers.

    The benchmark price for a tonne of iron ore at the Chinese port of Tianjin has sunk as much as 34 per cent since the beginning of July, reaching a low of $US86.70 a tonne on September 5, as growth in the industrial giant switches into lower gear. Since hitting the low, iron ore has regained some strength, rising by $US9 to $US105.1 after the US Federal Reserve unleashed its latest monetary stimulus which lifted global commodities prices.

    Leyland Asset Management senior portfolio manager Rohan Schmidt said the deal would be positive for Fortescue shares this morning but over the longer-term fate of the company was still tied with the direction of iron ore prices.

    "It looks like Fortescue stock may bounce on the open but it's still very much an iron ore price story," he said.

    "If the iron ore price stays under $US100 per tonne in the mid-term or well below this company would still be in trouble."

    Mr Schmidt said the deal announced this morning showed Andrew Forrest "still has a very good relationship with his bankers... once again he has shown his deal-making acumen".

    Mr Schmidt said, however, the debt may not be particularly attractive to the backer.

    "I imagine Credit Suisse and JP Morgan would want to offload this debt in the secondary market pretty quickly because I'm sure they don't want it on their balance sheets."

    Fortescue chief Nev Power said the company had started talks to restructure its bank facilities and scrap earnings-based covenants ahead of Fortescue's next review in December.

    ''This action, together with our previously announced measures, will continue to build on Fortescue's profitability, liquidity and above all, removes uncertainty around our financing arrangements," he said.

    Read more:

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Sep 17 9:41 PM | Link | Comment!
  • BHP Summary Review 2012

    BHP 2012 Results at a Glance

    > An 11 per cent increase in the 2012 financial year dividend takes the compound annual growth rate of our progressive dividend to 26 per cent over the last 10 years.

    > Strong momentum established with annual production records achieved at 10 operations. Our low-risk, largely brownfield projects in execution are expected to create substantial shareholder value.

    > Underlying EBIT (Earnings before interest and taxes) decreased by 15 per cent to US$27.2 billion and Attributable profit excluding exceptional items declined by 21 per cent to US$17.1 billion. Exceptional items totalling US$1.7 billion contributed to a 35 per cent decline in Attributable profit to US$15.4 billion.

    > Underlying EBIT margin remained at a robust 39 per cent, while Underlying return on capital was 23 per cent.

    > Net operating cash flow of US$24.4 billion reflected the strong cash generating capacity of the business throughout the economic cycle. Gearing of 26 per cent remains within the parameters defined by our solid A credit rating.

    > In FY2012, three fatalities occurred at controlled operations. The FY2012 total recordable injury frequency (TRIF) performance of 4.7 per million hours worked improved by six per cent compared with FY2011 (5.0).


    Disclosure: I am long BHP.

    Additional disclosure: The attached information is from BHP Billiton's web site.

    Sep 17 8:31 PM | Link | Comment!
  • $200 In Bank, $7M In Gold Hidden Inside Home

    One for all the Gold (GLD) bugs out there !!

    A Carson City, Nev., recluse whose body was found in his home at least a month after he died left only $200 in his bank account.

    But as Walter Samaszko Jr.'s house was being cleared for sale, officials made a surprise discovery: gold bars and coins valued at $7 million.

    "Nobody had any clue he was hoarding the gold," Carson City Clerk-Recorder Alan Glover told the Las Vegas Sun, adding it was found stored in boxes in the house and garage.

    The 69-year-old Samaszko was found dead in his home in late June after neighbors called authorities. He had been dead of heart problems for at least a month, according to the coroner.

    He had lived in the house since the 1960s, and his mother lived with him until her death in 1992.

    He left no will and had no apparent close relatives. But using a list of those who attended the mother's funeral, Glover's office tracked down Arlene Magdanz, a first cousin in San Rafael, Calif., the Sun reported.

    A recording said her phone number had been disconnected.

    "Our goal is to get the most money for the heir," Glover said.

    The gold coins had been minted as early as the 1840s in such countries as Mexico, England, Austria and South Africa, he said.

    Based on just the weight of the gold alone, Glover estimates their worth at $7 million. Because some of the coins appear to be collector's items, the value could go much higher, he said.

    Neighbors told authorities they knew little about Samaszko other than he was quiet and not a problem.

    Samaszko was "anti-government," Carson City's Nevada Appeal reported, and a few conspiracy theory books were found in the home along with several guns.

    "He never went to a doctor," Glover told the newspaper. "He was obsessed with getting diseases from shots."

    Samaszko also had stock accounts of more than $165,000 and another $12,000 in cash at the house.

    Glover said he wants to start selling off the gold as soon as possible. The IRS wants a share of the total, he said, and the case is relatively simple other than the agency's involvement.

    "At least you don't have 12 relatives fighting," Glover told the Appeal.

    Tags: GLD, Gold, Silver, Stocks
    Sep 17 7:36 PM | Link | 2 Comments
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