Resources wrap: Overseas boost for local bourse

AUSTRALIAN stocks opened higher this week, buoyed by positive leads from the US and Europe. The benchmark S&P/ASX200 index shot up 40 points early yesterday.

In resources news last week, Barrick Gold, the world’s largest producer, has fully hedged its Australian operating expenditures for 2012 and remains 70% hedged for 2013 to combat its biggest single currency exposure – the Australian dollar versus US dollar exchange rate.

It has locked in operating expenditures of A81c per $US in 2012 and 74c for 2013 and also has additional coverage for 2014-16 at levels substantially below current rates.

While gold production is expected to track 2011 volumes at up to 7.8 million ounces for the coming 12 months, copper output for Barrick will rise to up to 600 million pounds thanks to full-year volumes from Lumwana in Zambia.

It expects gold production to grow to 9Moz by 2016, driven largely by the $US3.8 billion ($A3.53 billion) Pueblo Viejo mine in the Dominican Republic which is due to come online by June and the $5 billion Pascua-Lama project, located on the border of Chile and Argentina, which is targeting first production by mid-2013.

However, total cash costs on the base metals front are expected to climb to between $1.90 and $2.20 per pound, reflecting higher sulphuric acid costs in Chile, higher royalties in Zambia and second-half start-up costs of the $400 million Jabal Sayid operation in Saudi Arabia.

Total gold cash costs of $520-560/oz, versus corresponding costs of $460/oz in 2011, reflect a change in the production mix, smaller amounts of capitalised waste stripping and higher labour and other inflationary costs.

In petroleum, asset sales and higher oil and gas prices pushed Santos’ full-year net profit up 51% to $753 million. The profit result included a $408 million profit after tax from the sale of a 15% interest in the GLNG project and Santos’ entire interest in Evans Shoal. The gains were partially offset by $102 million in write-downs relating to the Sangu assets in Bangladesh and the Kipper project in Bass Strait.

Underlying net profit was 20% higher than in 2010 at $453 million primarily due to higher commodity prices, offset by a stronger dollar and higher tax rate. JP Morgan had forecast Santos would report an underlying net profit of $431 million while full-year profit was predicted to reach $939 million.

Production for the full year dropped slightly on 2010, down 5% to 47.2 million barrels of oil equivalent due to asset sales, a lower net entitlement to Maleo gas production in Indonesia and lower Western Australian gas production due to adverse weather and additional maintenance.

And at the smaller end of the market, troubled gold miner Norseman Gold has signed a deal with Tulla Resources Group which will see Tulla pump $10 million into the ailing company and take control of its namesake operation in WA.

Tulla, through its affiliate L2 Project Management, will subscribe for $10 million of convertible loan notes in two tranches and will assume management and operational control of the Norseman mine immediately.

Norseman will retain ownership of the mine and will oversee the management.

An initial review by Tulla has indicated an early turnaround in operations will be achievable and it will complete a detailed three-year mine plan. It comes after the underperforming operation delivered only 10,658 ounces of gold from four mines at high cash costs of $1673/oz.

The Bullen and OK Decline underground mines will be put on care and maintenance while the review is being completed.