Resources wrap: Market tipped to fall

THE fallout from credit downgrades in Europe is expected to have a ripple effect on the local market this week as investors look for direction.

Credit rating downgrades to nine European nations were announced after the close of US markets on Friday.

Standard & Poor’s decision to strip France and Austria of their coveted AAA ratings and downgrade seven other European nations, including Spain and Italy, has further underlined how far from a solution to its debt crisis the eurozone is.

Germany is left with the eurozone’s only stable AAA rating, while it and France continue to push for stricter budget rules.

In resources news last week, Santos will target first production from the Fletcher Finucane oil project in the Carnarvon Basin in the second half of 2013 after lifting its stake to 48% and announcing a $A490 million final investment decision.

The project at WA-191-P will be developed through a three-well subsea tie-back to the Santos-operated floating production, storage and offloading facility at Mutineer Exeter.

Initial gross production is tipped to be 15,000 barrels per day during the first 12 months.

Santos reached FID on the project after buying out Tap Oil’s 8.2% interest in the project for $21.7 million.

Tap said it made the decision to sell Santos the stake after it became clear it could not generate sufficient revenue from the sale of oil processed at Mutineer Exeter to warrant expenditure on its stake.

Tap is the only Fletcher Finucane partner not involved in the Mutineer Exeter joint venture.

“While we would have preferred to develop the project and generate a return from oil production, this was not possible despite extensive negotiations with the Mutineer joint venture,” Tap managing director Troy Hayden said.

Santos said the quick 6-month turnaround from discovery to FID was down to the work of the Fletcher Finucane and Mutineer Exeter JVs.

It said oil production from the field would extend the life of the field by up to four years, giving participants time to look at other opportunities within tie-back distance of the Mutineer Exeter facilities.

Also, Centrex Metals and its Chinese JV partner Wuhan Iron and Steel Co have boosted their iron resources on the Eyre Peninsula with the upgrade of numbers at Greenpatch.

The inferred resource for Greenpatch was upgraded to 54.8 million tonnes at 24.9% iron and 33.8% silica, with an estimated Davis Tube Recovery grade of 26.8% and concentrate grade of 68.3% iron and 2.97% silica.

The resource estimate was based on 47 diamond drillholes and the company has set a further exploration target of 60-120Mt at 23-27% iron.

The upgrade boosts the JV’s Eyre Peninsula resources to 668.4Mt across three projects.

Centrex holds 40% of the JV with Wuhan holding the balance.

The JV recently identified the Fusion project as its preferred option for first development.