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October 23 - 29, 2009
Of late, there has been no shortage
of talk about BHP Billiton's lack of
copper production growth options
apart from the proposed long-dated
expansion of Olympic Dam.
However, in the copper market,
there are few if any top-tier projects
that are not already owned by one
of the world's top miners and even
those are difficult for technical and
Goldman Sachs JBWere estimates
Rio Tinto could grow its copper
production by an average of 8.7 per
cent a year from 2010 to 2020 based on
its existing growth options, such as
Oyu Tolgoi, La Granja, Grasberg and
Resolution, albeit with high political
and technical risk.
In contrast, even with the $US15
billion expansion of Olympic Dam,
BHP's copper production would
increase by only 5.4 per cent a year
over the same period, also including
its stake in the technically-difficult
Resolution project in Arizona.
Existing mines such as Escondida
and Kennecott Utah Copper require
capital to simply maintain production.
GSJBW analyst Neil Goodwill
has urged BHP to formulate and
communicate an appropriate strategy
for the expansion at Olympic Dam.
At the moment however, BHP is
probably more concerned about
restoring the 80 per cent of Olympic
Dam's existing underground
production that has been shuttered
due to an accident earlier this month.
In perhaps a sign of the scarcity of
good acquisition targets in copper,
Goodwill did not list any proposed
acquisitions for BHP or Rio in his
report. Morgan Stanley recently
suggested BHP should drop its focus
on tier-one assets in copper and dip
down to tier-two assets -- presumably
in the order of OZ Minerals or
Equinox Minerals -- in order to expand
Meanwhile, Merrill Lynch has
reignited speculation of a BHP bid for
Canada's Potash Corp in a note that
said an all-cash bid for Potash at a 30
per cent premium could be 13 percent
accretive to earnings in the first and
second year. Potash currently has a
market value of $US28 billion.
diminish Rolled and ousted
The former executive chairman of the
oil and gas explorer Drillsearch Energy,
Peter Penfold Simpson, is a difficult
man to budge.
Despite tendering his resignation to
Drillsearch following a shareholder putsch
this year, Simpson is still chief executive of
the group's 79.5 per cent-owned Canadian
oil and gas venture, Circumpacific Energy.
Simpson even read out his resignation to
an extraordinary shareholder meeting in
June, also relating to Circumpacific (aka
But Simpson's letter was never processed
at CER's Calgary head office. Two days
after Simpson read out his resignation,
his lawyers argued he resigned as the
"president'' of CER, not as a "director''.
"We understand that there is some
confusion about whether or not our
client has also resigned as a director of
Circumpacific,'' the letter from the lawyers
said. He was then installed as chief
Since then, CER has been chugging
along with Simpson and without the input
of its main shareholder.
Last month the company noted how it
had to manage CER "in the interests of
all shareholders, not merely Drillsearch''.
This was in response to Drillsearch's
call for a meeting next month to remove
Simpson and two allies from the board.
About "20.5 per cent of share capital
in Circumpacific is owned by a diverse
range of over 220 other shareholders,
the majority of whom are unrelated to
Drillsearch,'' CER protested in a media
Simpson told CBD he always intended
to quit the CER board at the November
"I would have appreciated the time to do
an orderly handover,'' he said. "We can't
leave without there being independent
directors and people in place.''
But Drillsearch is concerned Simpson
could farm out some of the assets before
The Drillsearch matter now looks set to get
an airing in the Canadian courts. "Despite the
Simpson resignation having been provided to
the defendant CER, the defendant Simpson has
continued to purport to act as a director of the
defendant CER, and the defendant CER has
failed to make timely public disclosure of the
Simpson resignation,'' the statement of claim
lodged by Drillsearch last week at the Supreme
Court of British Columbia says.
The filing notes that Simpson and two of
his fellow directors, Roger Tidmarsh and Paul
Johns, pushed on with plans to sell CER assets
and raise capital. Drillsearch also claims
Simpson, who hails from the whitegoods
dynasty, has been attempting to claim payments
for his "management services''.
Aside from being born into the Simpson
dynasty, Peter adopted his middle name,
Penfold, from the famous wine-making family.
esignation '' the
statement of claim
who hails fr
The boss who
wouldn't go away
Peter Simpson's letter
of resignation taken
Energy's website and
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