TWO former senior employees of UOB Kay Hian Private Limited (UOBKH) were charged on Wednesday for allegedly lying to the Monetary Authority of Singapore (MAS) in relation to reports on a then Catalist aspirant. Lan Kang Ming, 38, and Wee Toon Lee, 34, each face three charges of providing MAS with false information in October 2018 in relation to due diligence reports on an unidentified company applying to list on the Catalist board of the Singapore Exchange. MAS said in a media statement on Wednesday that it was performing an onsite inspection of UOBKH between June and August 2018, to assess the latter's controls, policies and procedures in relation to its role as an issue manager for Initial Public Offering (IPOs). During the examination, Lan and Wee were said to have provided different versions of a due diligence report relating to background checks on a company applying to be listed on the Catalist board of the Singapore Exchange. UOBKH had acted as the issu...
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Given the positive outlook for coal in Asia, those with an appetite for risk and deep pockets may get some bargains among the flurry of asset sales
Clyde Russell, Reuters
15 December 2014
If you were looking for a sign that coal prices have finally bottomed out, then the ramping up of merger and acquisition activity is often a good indicator.
Just as major mining companies tend to buy assets at inflated prices at the zenith of the market, they tend to sell them at discounts at the nadir.
A flurry of announcements have hit the headlines recently, including Anglo American’s proposed sale of coal assets in Australia and South Africa, and Peabody Energy and Glencore agreeing to form a joint venture at neighbouring mines in Australia’s Hunter Valley basin.
The merger activity has not been limited to Australia and South Africa, with Brazil’s Vale selling a stake in its Mozambique mine to Japan’s Mitsui and Consol Energy saying it plans to pursue an initial public offering of some of its US thermal and coking coal assets.
Companies tend to use obfuscatory language in the announcements of these deals, often resorting to terms such as “unlocking shareholder value”, but behind the spin is often the simple message that the assets are loss-making and the pain on the bottom line has become too much to bear, or if they are profitable, they are not providing enough return on capital.
Selling loss-making coal mines can provide some short-term relief to a company’s balance sheet, even if the management of the firm believes in the longer-term story of the asset.
Witness Rio Tinto’s decision this year to sell its Mozambique coal mines for a token US$50 million, having paid US$4 billion in 2011 to gain a foothold in what was then seen as one of the world’s most promising undeveloped coal basins.
Rio bought at the top of the market, with the spot price of thermal coal at Australia’s Newcastle Port, an Asian benchmark, peaking at US$136.30 a tonne in January 2011 and metallurgical coal reaching a record around US$330 in the middle of that year.
Since then, Newcastle coal has steadily declined, reaching a 51/2-year low of US$62.25 a tonne earlier this month, down 74 per cent since the 2011 high, while metallurgical coal has slumped to about US$110.
Ultimately Rio’s management took the view that spending more cash to develop the necessary infrastructure to scale up its Mozambique operations made little sense at a time of sustained low prices, even if the company believes in the longer-term demand outlook.
So, is it a good time to buy a coal mine, even at a bargain price?
The seaborne market is still well oversupplied and the world’s top importer, China, seems to be on the warpath against pollution, which means cutting the growth of coal, given that it is the dominant fuel in the country.
There has been talk that China is close to “peak coal” - the time at which it will use the maximum amount of the fuel before consumption starts to drop.
The country’s peak coal has been forecast to come between 2022 and 2027 but organisations such as the government-affiliated Energy Research Institute are predicting coal use will top out before 2020.
However, there are reasons to be sceptical about the early onset of peak coal in China, or indeed across Asia as a whole.
The International Energy Agency said that for China’s coal use to peak by 2019, one of the following would have to happen.
Economic growth would have to slow to 3 per cent from 2015 onwards, gross domestic product and electricity growth would have to decouple by 4.5 percentage points or the country would need to generate a further 2,500 terawatt-hours from natural gas, nuclear or renewables.
The first two are implausible and the third would require China to raise natural gas consumption by 250 per cent if it used this fuel for the additional electricity. In other words, its coal demand looks set to grow for some time to come.
But the rest of Asia probably will import more coal in the next few years, given the development of new power plants in Malaysia, Thailand and Vietnam.
It is also possible Indonesia will ship less thermal coal as its domestic needs grow and the government cracks down on illegal mining.
Overall, the medium to longer-term outlook for coal in Asia is still fairly positive, meaning those with sufficient risk appetite and deep pockets may get some bargains as the big miners offload underperforming assets.