Deloitte E&R Index up by 4.3 per cent in Dec quarter

Overall the Index increased by 4.3 per cent excluding the removal of Felix Resources, following an increase in the September quarter of 15.8 per cent.
The most notable individual movements in market capitalisation came from Lihir Gold, Macarthur Coal, PanAust, New Hope and Arrow Energy.
The Index has revealed that the most significant movement in market capitalisation during the December 2009 quarter came from Lihir Gold, which increased $1.1 billion (17.1 per cent). Lihir followed the fortunes of gold for much of the quarter, with the price of the precious metal increasing 10.2 per cent during the period. The company ended the December 2009 quarter at number one on the Deloitte Qld E&R Index.
Macarthur Coal also had an impressive quarter, with market capitalisation increasing $460 million (19.2 per cent). Early in the December 2009 quarter, CEO Nicole Hollows, announced that first half profit may fall by up to as much as 72 per cent due to the strength of the Australian dollar and lower prices for its products. The market reacted favourably to the announcement of Macarthur Coal’s takeover bid for Gloucester Coal at the end of the period, as well as several other deals. The transactions will greatly increase Macarthur Coal’s reserves and production capacity, as well as achieve diversification both geographically and across product mix.
Analysts are divided on whether the deals will be earnings accretive or dilutive for Macarthur Coal, primarily due to a perceived lack of operational synergies and growth opportunities for Gloucester’s mines.
Macarthur Coal ended the quarter at number four on the Deloitte Qld E&R Index.
PanAust Resources enjoyed a positive December quarter, with market capitalisation increasing $220 million (15.3 per cent). Being essentially a pure copper/gold player, PanAust’s stock price responded positively to an 18.8 per cent increase in the copper price, and a 10.2 per cent increase in the gold price, during the quarter. The company ended the quarter at number five on the Deloitte Qld E&R Index.
The most significant decrease in market capitalisation during the December 2009 quarter came from New Hope Corporation, which decreased $827 million (17.6 per cent). This decrease offset the $1.0 billion increase achieved in the September 2009 quarter. New Hope’s product mix is primarily focussed around thermal coal, the market for which is still quite uncertain. This has led to negative market sentiment, though recent spot market deals have signalled possible price increases in early 2010.
New Hope announced that unaudited profit was up 9 per cent for the September quarter 2009, with coal production up 11 per cent on the previous corresponding period, and coal sales up 20 per cent. The market responded negatively to the announcement that net profit was likely to decline in 2010.
New Hope ended the quarter at number two on the Deloitte Qld E&R Index.
The market capitalisation of Arrow Energy decreased $88 million (2.8 per cent) during the December quarter 2009, and it ended the period at number three on the Index.

Six month movements
The Deloitte Qld E&R Index increased by $1.5 billion or 6.4 per cent during the six month period to December 31st, 2009 (20.7 per cent, excluding the removal of Felix). The ASX All Ordinaries increased by 23.7 per cent, and the S&P/ASX 200 Energy and S&P/ASX 200 Materials indices increased by 11.7 per cent and 26.0 per cent, respectively.

Twelve month movements
The Deloitte Qld E&R Index increased by $772 million or 3.2 per cent over the twelve month period to December 31st, 2009 (17.1 per cent, excluding Felix). The ASX All Ordinaries increased by 33.4 per cent, and the S&P/ASX 200 Energy and S&P/ASX 200 Materials indices increased by 27.1 per cent and 46.9 per cent respectively over the same period.

Shipping
The Baltic Dry Index (BDI), which gauges the cost of shipping dry bulk commodities on 26 key routes and is used as a popular proxy for global growth due to its reflection of global trade volume, has increased 35.4 per cent during the December 2009 quarter to 3005 points, and is up 288.2 per cent in the 12 months to the end of December.
Congestion issues at Chinese and Australian ports also contributed to rapid increases in shipping rates in mid-November. The primary Australian ports affected were Dalrymple Bay and Hay Point coal terminals. Ship queues increased from 60 to 90 ships between mid-October and mid-November, leading to substantial demurrage costs for Queensland coal miners.
These demurrage costs are one of the issues Macarthur Coal CEO, Nicole Hollows, cited as a contributor to the likelihood of lower profits in 2010.

The Deloitte Qld E&R Index is compiled from publicly available information provided by the Australian Securities Exchange Limited (ASX). The Index is based on the market capitalisation of each Queensland E&R listed company, which incorporates those companies with industry classifications of energy, materials or utilities. There are 74 companies currently included in the Deloitte Qld E&R Index. Deloitte also publishes the Deloitte Qld Index, a monthly review of all Queensland listed companies on the ASX.