News that Whitehaven had not received a single acceptable bid despite hanging a large “for sale” sign on its front door cost shareholders in the New South Wales-focused coal miner the best part of $1 billion.
That number can be calculated by looking at Whitehaven’s peak share price last month of $7.32 and the $5.43 low hit on Wednesday of this week.
Managing director Tony Haggarty reckons it is now “back to normal” at the Gunnedah Basin miner, not that anyone familiar with the coal business actually believes him.
What happened at Whitehaven looks to be a case study in how coal asset valuations have been skewed by the political uncertainties swirling around the Australian carbon tax and mining tax debates.
In other words, Whitehaven didn’t get a bid that its board considered high enough because bidders could not work out the future profitability of the company when the proposed mining tax and the proposed carbon tax are law, and layered onto a miner’s profit and loss account.
If that theory is correct then Hogsback reckons the canny Haggarty and his crew will simply ride out the next few years of tax uncertainty before putting Whitehaven back on the sale block because of an overseas political event which is yet to earn headlines in Australia.
Canada is where the winds of change are blowing in the great mining/carbon tax debate and while it is a long way from Australia there are significant similarities between the two countries, including a big natural resources sector and a population tired of tricky politicians playing games with environmental and tax policies.
First, let’s look at what happened at Whitehaven where last year management received a number of tentative offers to sell the company, with China’s Yanzhou Coal and India’s Aditya Birla said to be front-runners.
Yanzhou was reported to be the last man standing when Haggarty called time with a rumoured offer of $3.74 billion, not that anyone ever saw the colour of the money or the terms under which it would be paid.
It is speculation on the part of The Hog but he reckons that no one corralled into the bidding circle by the Whitehaven sales team, led by investment bankers from Goldman Sachs, ever reached for their cheque books.
In effect, the Whitehaven sale which started on October 29 last year was killed by uncertainty over future tax and anti-mining policies of a government which is being forced to use the Australia’s resources sector as a giant piggy bank to pay for its social welfare programs.
In Canada, something of a similar political nature has been happening – with a big difference, called an election.
A few days before Haggarty canned the Whitehaven sale Canadians voted to end years of uncertainty about resource development policy and a “go-it-alone” carbon tax, or expensive emissions trading scheme.
In a landslide of historic proportions the Canadian Conservative Party was swept back into office, ending years of minority government and potentially killing the pro-tax, anti-mining, socialist-oriented Liberal Party – which is actually the Labor Party seen through Australian eyes.
So sweeping was the election result that the Liberal (Labour) Party is no longer the official opposition. That title goes to the New Democrats who won more seats than the Liberals, the “natural party of government” in Canada for the past 100 years, while also sweeping the separatist French speaking Bloc Quebecois into the rubbish bin of history.
It’s a long shot by The Hog, and an early one given Australia has two and a half years of Labor/Green government to run, but Canada is a glimpse of what lies ahead as high cost to consumers/voters of a big new (anti-coal) carbon tax eats out their wallets.
In other words, the current Australian government appears to be as doomed as the Canadian Liberals thanks to its anti-mining policies.
That also means that assets not sold today will be worth a lot more in two and a half years time, a fact that has not escaped the attention of Haggarty and his fellow Whitehaven board members.
