Gresham Mining & Infrastructure Services Quarterly
We are pleased to present Edition 27 of the Gresham Mining & Infrastructure Services Quarterly (GMISQ), a snapshot of the performance, news and trends across the resources and infrastructure services sectors.
After a significant deterioration in equity markets during the early stages of the COVID-19 pandemic, share prices rebounded strongly during the June quarter. The Gresham Mining & Infrastructure Services Index (GMISI) increased by 25%, representing the biggest quarterly gain since inception of the index in 2012. Share price appreciation was recorded by 40 of the 50 constituents, with the gains seen across companies of all sizes and sub-sectors. While there has been a marked improvement in the GMISI, it remains well below its pre-coronavirus position, currently sitting at levels previously seen in 2016.
In this edition’s Quarterly Focus, we update our analysis on the sector’s outlook, reviewing disclosures by services companies, major mining companies and governments. • Mining production in Australia has been largely uninterrupted throughout the pandemic, and equity raisings have continued to be supported for quality exploration projects. The outlook is less clear, with potential for the economic impacts of COVID-19 to flow through to commodity prices and the viability of some planned and existing operations over time. • Federal and state governments have announced a range of initiatives to fast track planned “shovel ready” infrastructure projects, complementing other stimulus measures. • The large majority of services companies have now provided some form of commentary regarding the effect of COVID-19 and their response strategies. Despite many companies observing limited impact on their performance to date, nearly half withdrew guidance during March-April due to the uncertain conditions. A number of these companies have since either reaffirmed previous guidance or provided updated forecasts. • Consensus estimates still point to earnings growing across the sector during the next twelve months, with companies that are forecast to record falls in FY20 generally expected to recover in FY21.
The upcoming reporting season will be the next major update for the sector, with outlook statements likely to be a key focus.
Editorial Team
Chris Branston Tom Waddell David Burton [email protected] [email protected] [email protected]
Edition 27 Gresham Advisory Partners Ltd is a leading Australian mergers and acquisitions and capital advisory 1 July 2020 business and one of Australia’s largest and highest ranking independent corporate advisors. Share Price Movements
GMISI Constituents1 Leaders & Laggards (Share Price)1
Ranks Market Cap (A$m) Share Leaders Laggards Company price Jun Mar 30 Jun 20 31 Mar 20 Δ% 100% 89% 82% 1 1 CIMIC Group Ltd. (ASX:CIM) 7,676 7,527 4% 78%
2 2 Orica Ltd. (ASX:ORI) 6,750 6,227 8% 53%
3 3 Seven Group Holdings Ltd. (ASX:SVW) 5,830 3,814 53%
4 4 Worley Ltd. (ASX:WOR) 4,539 3,200 42%
5 6 Mineral Resources Ltd. (ASX:MIN) 3,990 2,632 52% (6%) 6 5 ALS Ltd. (ASX:ALQ) 3,165 2,682 18% (7%) (11%) (18%) (20%) 7 7 Downer EDI Ltd. (ASX:DOW) 2,605 1,772 47%
8 8 Monadelphous Group Ltd. (ASX:MND) 1,022 971 5% Veem 9 11 Perenti Global Ltd. (ASX:PRN) 810 419 89%
10 10 NRW Holdings Ltd. (ASX:NWH) 796 535 49% LogiCamms
PerentiGlobal
MMAOffshore
Group Boart Longyear
11 9 Service Stream Ltd. (ASX:SSM) 777 743 5% Engineering MitchellServices
12 12 Macmahon Holdings Ltd. (ASX:MAH) 550 399 38%
Matrix Composites & Seven Group Holdings
13 15 Alliance Aviation Services Ltd. (ASX:AQZ) 481 212 82% Resource Development AllianceAviation Services 14 13 Imdex Ltd. (ASX:IMD) 431 345 25%
15 14 Emeco Holdings Ltd. (ASX:EHL) 367 311 18% 1 16 16 RPMGlobal Holdings Ltd. (ASX:RUL) 235 186 27% Performance Relative to S&P 200 Indices
17 17 MACA Ltd. (ASX:MLD) 232 172 35%
18 19 Lycopodium Ltd. (ASX:LYL) 189 161 18% 49%
19 18 Civmec Ltd. (ASX:CVL) 185 167 11% 30% 25% 26% 27% 28% 18% 17% 20 20 Mader Group Ltd. (ASX:MAD) 156 136 15% 12% 13% 15% 16% 7% 21 24 Fleetwood Corp. Ltd. (ASX:FWD) 151 117 29% 2% 4%
22 22 EnviroSuite Ltd. (ASX:EVS) 149 127 16%
23 21 Engenco Ltd. (ASX:EGN) 141 132 7%
24 23 BSA Ltd. (ASX:BSA) 130 125 3%
25 27 GR Engineering Services Ltd. (ASX:GNG) 111 108 3%
26 26 Southern Cross Electrical Engineering Ltd. (ASX:SXE) 109 109 -
27 25 Cardno Ltd. (ASX:CDD) 107 110 -2% IT
GMISI Energy
28 33 Mitchell Services Ltd. (ASX:MSV) 107 60 78% Utilities
A-REIT
Materials Industrials
29 29 Intega Group Ltd. (ASX:ITG) 102 82 24% Resources
Cons. Disc.
Health Care
All All Ordinaries
Cons. Staples S&P/ASX 200
30 28 SRG Global Ltd. (ASX:SRG) 94 98 -5% TelcoServices
31 52 Resource Development Group Ltd. (ASX:RDG) 76 9 100% Financial-x-A-REIT
32 30 Austin Engineering Ltd. (ASX:ANG) 75 69 8% 33 40 Decmil Group Ltd. (ASX:DCG) 72 31 9% Performance Over Time 34 35 Acrow Formwork & Construction Services Ltd. (ASX:ACF)69 45 43%
35 32 Mastermyne Group Ltd. (ASX:MYE) 66 62 7% Gresham Mining & Infrastructure Services Index (GMISI) 36 31 MMA Offshore Ltd. (ASX:MRM) 60 64 -6% 95 S&P/ASX 200 37 34 Veem Ltd. (ASX:VEE) 52 58 -11% S&P/ASX 200 Resources 38 38 Saunders International Ltd. (ASX:SND) 50 40 25% 85
39 39 Boom Logistics Ltd. (ASX:BOL) 45 36 24%
40 41 Primero Group Ltd. (ASX:PGX) 45 31 44% 75
41 36 AJ Lucas Group Ltd. (ASX:AJL) 42 42 - 65 42 42 Swick Mining Services Ltd. (ASX:SWK) 38 30 25%
43 43 Laserbond Ltd. (ASX:LBL) 38 30 23% 55 44 37 Boart Longyear Ltd. (ASX:BLY) 33 40 -20%
45 45 XRF Scientific Ltd. (ASX:XRF) 32 23 41% 45 46 44 LogiCamms Ltd. (ASX:LCM) 26 28 -7%
47 46 Valmec Ltd. (ASX:VMX) 22 23 -3% 35 48 47 Matrix Composites & Engineering Ltd. (ASX:MCE) 16 19 -18%
49 50 Babylon Pump & Power Ltd. (ASX:BPP) 15 11 38% 25 Jun17 Dec17 Jun18 Dec18 Jun19 Dec19 Jun20 50 49 Tempo Australia Ltd. (ASX:TPP) 15 12 21%
Notes: (1) Performance measured over the period 31-Mar-20 to 30-Jun-20 (inclusive). Source: FactSet, IRESS. 2
2 Valuation Multiples
Sector valuation multiples recovered over the quarter and currently sit close to long term averages. Despite continuing uncertainty in relation to the longer term impacts of the COVID-19 crisis, the PE multiple of the All Ordinaries index is currently around a 10-year high.
1 Year Forward Price Earnings Ratio Over Time
23x
21x
19x
17x
15x
13x
11x
9x GMISI 10-year Median:
7x GMISI 5x All Ordinaries 3x Jun 10 Dec 10 Jun 11 Dec 11 Jun 12 Dec 12 Jun 13 Dec 13 Jun 14 Dec 14 Jun 15 Dec 15 Jun 16 Dec 16 Jun 17 Dec 17 Jun 18 Dec 18 Jun 19 Dec 19 Jun 20
Price Earnings Ratio (FY21F)
30x
25x
20x
15x Median: 10.5x
10x
5x
-
ORI
LYL LBL
IMD MIN CIM
CVL EHL
RUL BOL ALQ VEE SXE BSA ACF
AQZ
PRN PGX SND MLD
VMX SRG SSM MSV ANG MYE
MAH DCG MAD
SVW SWK FWD MND GNG
NWH
DOW WOR
Dividend Yield (FY21F)
8.0%
7.0%
6.0%
5.0% Median: 3.6%
4.0%
3.0%
2.0%
1.0%
-
ORI
LYL LBL
CIM MIN IMD
CVL EHL
ACF BSA ALQ VEE BOL SXE RUL EVS
AQZ
SND PRN MLD PGX
ANG SSM MYE SRG MSV VMX
MAH DCG MAD MCE
MND FWD
SWK GNG SVW
NWH
DOW WOR
Large Cap (>$1bn) Mid Cap (between $200m and $1bn) Small Cap (<$200m)
Notes: (1) Only companies with consensus earnings forecasts are included in charts; (2) Share prices are as at 30-Jun-20; (3) Earnings multiples are not calendarised; (4) Companies exhibiting negative multiples have been excluded from the above analysis. Source: FactSet. 3
3 Valuation Multiples (cont.)
This "size premium" is evident in enterprise value multiples, with large cap companies averaging c.2x higher multiples than the rest of the peer group. The COVID-19 situation is also seeing around a quarter of companies now trade below reported NTA.
EV/EBIT (FY21F)
20.0x
18.0x
16.0x
14.0x
12.0x Median: 7.9x
10.0x
8.0x
6.0x
4.0x
2.0x
-
ORI LBL LYL
MIN CIM IMD
CVL EHL
RUL ACF
BOL BSA SXE ALQ VEE
AQZ
SND PRN MLD PGX
SSM MSV SRG VMX MYE ANG
MAD MAH DCG
SWK MND SVW FWD GNG
NWH
DOW WOR
EV/EBITDA (FY21F)
16.0x
14.0x
12.0x
10.0x Median: 5.1x 8.0x
6.0x
4.0x
2.0x
-
ORI
LBL LYL
IMD MIN CIM
EHL CVL
RUL BSA ALQ VEE ACF BOL SXE
AQZ
SND PGX MLD PRN
VMX SSM SRG MSV ANG MYE
MCE MAD DCG MAH
SVW GNG FWD SWK MND
NWH
WOR DOW
PRICE/NTA
600.0%
500.0%
400.0%
300.0% Companies trading at a Median: 175% discount to NTA
200.0%
100.0%
-
AJL
LYL ORI LBL
IMD MIN
TPP EHL CVL
XRF RUL ACF
VEE EVS BSA BPP SXE BOL
AQZ
SND MLD LCM PRN
PGX
MSV MYE EGN ANG CDD SRG VMX
RDG MAH DCG MAD MCE
SVW SWK GNG MND FWD
NWH MRM
Large Cap (>$1bn) Mid Cap (between $200m and $1bn) Small Cap (<$200m) Notes: (1) Only companies with consensus earnings forecasts are included in charts; (2) Share prices are as at 30-Jun-20; (3) Earnings multiples are not calendarised; (4) Enterprise Value is based on market capitalisation plus minority interests and last reported net debt adjusted for capital raisings and acquisitions; (5) Companies exhibiting negative multiples have been excluded from the above analysis. Source: FactSet. 4
4 Forecast Profitability & Gearing
Whilst analysts pulled back earnings forecasts following the spread of COVID-19, consensus estimates continue to indicate solid growth to FY21. Some of this is acquisition driven or a rebound from FY20 performance, and for others it reflects the resilience of mining activity.
Forecast EBITDA Growth (FY19-20F CAGR)
70.0%
50.0%
30.0% Median: 5%
10.0%
(10.0%)
(30.0%)
(50.0%)
ITG
AJL
LBL LYL ORI
MIN CIM IMD
BLY
CVL EHL
RUL XRF ACF
ALQ VEE BPP SXE BOL BSA
AQZ
PGX MLD PRN LCM
MSV MYE SSM ANG EGN VMX CDD SRG
MAH MAD RDG
MND FWD
SVW SWK GNG
NWH MRM
WOR DOW Forecast EBITDA Growth (FY20-21F CAGR)
50.0%
40.0%
30.0%
20.0% Median: 5% 10.0%
-
(10.0%)
(20.0%)
LBL LYL ORI
CIM MIN IMD
CVL EHL
ACF RUL
SXE VEE BSA BOL ALQ
AQZ
PGX MLD SND PRN
SSM SRG MSV ANG MYE VMX
MAH MAD
SVW SWK MND FWD
GNG
NWH
DOW WOR EBITDA Margins (FY21F)
30.0%
25.0%
20.0% Median: 13% 15.0%
10.0%
5.0%
-
LBL LYL ORI
MIN IMD CIM
EHL CVL
ACF
ALQ VEE BSA SXE
AQZ
PRN MLD PGX SND
SSM MSV ANG MYE SRG VMX
MAH MCE MAD DCG
FWD
SWK SVW GNG MND
NWH
WOR DOW
NET DEBT / ENTERPRISE VALUE
90.0%
60.0% Median: 18% 30.0%
-
(30.0%)
(60.0%)
(90.0%)
ITG
AJL
LYL ORI LBL
IMD MIN CIM
BLY
EHL CVL TPP
XRF ACF RUL
BPP EVS BOL VEE ALQ BSA SXE
AQZ
MLD PGX PRN LCM SND
MSV CDD SRG VMX ANG MYE SSM EGN
MAD DCG MCE MAH RDG
SWK MND SVW FWD GNG
MRM NWH
DOW WOR
Large Cap (>$1bn) Mid Cap (between $200m and $1bn) Small Cap (<$200m)
Notes: (1) Only companies with consensus earnings forecasts are included in charts; (2) Share prices are as at 30-Jun-20; (3) Enterprise Value is based on market capitalisation plus minority interests and last reported net debt adjusted for capital raisings and acquisitions. Source: FactSet. 5
5 Contract Awards
New contract awards continued during the quarter, with the largest being wins by Macmahon and Downer in relation to mining operations at Byerwen and Eliwana respectively.
Major Contract Awards
Date Commodity/ Company Client Project/Facility Location Services Value (A$m) Announced Sector Saracen Mineral Holdings 30-Jun-20 GR Engineering Thunderbox & Carosue Dam WA EPC 29 Gold Limited
Fortescue Metals Group Cloudbreak WA Overpass D&C Iron Ore Resource 24-Jun-20 26 Development Group Tianye SXO Gold Mining Minjar WA Crushing & screening Gold
Saunders 23-Jun-20 BP Bulwer Island QLD Mechanical refurbishment 12 Energy International Silver Lake Resources 18-Jun-20 GR Engineering Deflector WA EPC 23 Gold Limited Siemens Gamesa London Array offshore wind 15-Jun-20 Worley UK Maintenance na Energy Renewable Energy farm Alumina; Australian mining, refining 15-Jun-20 Worley Alcoa of Australia Ltd WA; VIC Engineering services na bauxite; and smelting operations aluminium GR Engineering 15-Jun-20 Salt Lake Potash Limited Lake Way WA Design and construction 107 Potash Services Airport/terminal 9-Jun-20 Primero Group Rio Tinto Limited Koodaideri WA 20 Iron Ore construction
4-Jun-20 Macmahon QCoal Group; JFE Steel Byerwen QLD Mining services 700 Coal
Construction and 4-Jun-20 Worley Syncrude Canada Ltd Hydrocarbon facilities Canada na Energy maintenance
BHP WAIO Mining Area C WA Dewatering Iron Ore
Rio Tinto Limited Pilbara marine infrastructure WA Maintenance Iron Ore
Maintenance and 1-Jun-20 Monadelphous Fortescue Metals Group na WA 150 Iron Ore shutdown
Newcrest Mining Lihir Island PNG Minor capital works Gold
Not disclosed Coal seam gas QLD Maintenance Energy
Early Mining and 26-May-20 Downer Fortescue Metals Group Eliwana WA 450 Iron Ore Maintenance Gibson Energy; US 22-May-20 Worley Hardisty Energy Terminal Canada EPC na Energy Development Group
20-May-20 Worley BP International Offshore developments na Engineering services na Energy
20-May-20 SCEE Energy Queensland Limited Energy network QLD Maintenance 40 Utilities
Department of Industry, Science, Energy and 15-May-20 GR Engineering Northern Endeavour FPSO Timor Sea O&M 32 Energy Resources of the Australian Government
13-May-20 Civmec Rio Tinto Limited Mesa A WA SPM; E&I 165 Iron Ore
Water Corporation Main Renewals Program WA Infrastructure services Infra 12-May-20 Valmec 23 Newmont Tanami Expansion NT Infrastructure works Gold
Coleman Rail Metronet WA na 25 Infra 30-Apr-20 Decmil Department of Transport Bruce Highway QLD Road works 11.5 Infra and Main Roads QLD Saunders Sydney B4A Terminal 22-Apr-20 na NSW D&C of tanks 20 Infra International Expansion
Source: Company announcements. 6
6 Corporate Activity
M&A remained quiet during the quarter, with only a few smaller deals being announced. In contrast with the broader market, there has also been limited equity raising activity, with the exception of Decmil’s recapitalisation and Alliance Aviation’s Placement and SPP. Downer also announced a $400m entitlement offer in July.
Mergers & Acquisitions
Date Value Interest Status Target Business Target HQ Seller Acquirer Forum Cons. Announced (A$m) (%)
United Surface 15-Jun-20 Pending Spray coatings Altona, VIC na LaserBond 1 Private 100% Cash Technologies
17-Apr-20 Complete Mining Wear Parts Mining parts Yatala, QLD na Mineral Resources na Private 100% na
All Industrial Mining support 6-Apr-20 Pending Brisbane, QLD na Aorere Resources 51 Private 100% Scrip Network services
Capital Raisings
Amount (Discount) / Date Status Company Type Raised Premium to Purpose Announced (A$m) Last Price (%)
Alliance Aviation 11-Jun-20 Complete Placement 91.9 (5%) Provide funding to support growth strategy Services
Accelerated pro rata non- Improve working capital, net cash position and 28-May-20 Complete Decmil Group renounceable entitlement 50 (75%) current ratio, and fund pipeline of tenders offer
Active Share Buybacks
Date Announced Company Type Size Purpose
7-Apr-20 Swick Mining Services On-market 4% Capital management
11-Mar-20 Mitchell Services On-market 5% Ongoing capital management
Acquire shares where the Board deems the share 14-Feb-20 Cardno On-market 10% price to be below intrinsic value
13-Dec-19 CIMIC On-market 8 10% Ongoing capital management
Source: Company announcements. 7
7 Executive Movements
Executive & Director Appointments
Date Announced Company Name Role Date Effective
17-Jun-20 Resource Development Group Mike Grey Non-Executive Director 17-Jun-20
17-Jun-20 Resource Development Group Mark Wilson Non-Executive Director 17-Jun-20
17-Jun-20 Resource Development Group Paul T Brown Non-Executive Director 17-Jun-20
2-Jun-20 RPMGlobal Stephen Baldwin Non-Executive Director 1-Jul-20
1-Jun-20 MACA Mike Sutton Managing Director 1-Jun-20
Independent Non-Executive 26-May-20 Fleetwood Martin Monro 1-Jun-20 Director
26-May-20 Fleetwood Jason Kunkler COO of Building Solutions 1-Jun-20
19-May-20 Decmil Group Dickie Dique Chief Executive Officer 19-May-20
Executive & Director Resignations / Retirements
Date Announced Company Name Role Date Effective
30-Jun-20 Envirosuite Adam Gallagher Non-Executive Director 31-Jul-20
29-Jun-20 Decmil Group Scott Criddle Executive Director 29-Jun-20
Chairman and Non-Executive 2-Jun-20 RPMGlobal Allan Brackin 30-Jun-20 Director
6-Apr-20 SRG Global John Derwin Non-Executive Director 3-Apr-20
Source: Company announcements. 8
8 Quarterly Focus: COVID-19 Update
COVID-19 updates and quarterly reports from major resources companies are continuing to point to production levels being maintained at Australian operations. There have been greater impacts at overseas sites, with countries such as South Africa and Peru imposing lockdown measures. A number of companies have also flagged deferrals or reductions in capex and exploration expenditure, including in the oil and gas sector which has seen significant price volatility. COVID-19 Disclosures: Production
Company
The company achieved record production at WA iron ore and reiterated guidance for petroleum, iron ore and BHP metallurgical coal. Guidance for copper and energy coal was placed into review following the temporary suspension of operations at Antamina and Cerrejón due to COVID-19.
All of Rio’s assets continue to operate and Pilbara iron ore production of 78Mt was 2% higher yoy, inclusive of impacts from tropical cyclone Damien in February 2020. Rio Tinto Copper guidance was lowered due to a potential reduction in H2 output at Escondida from COVID-19 measures. Titanium dioxide slag is expected to be at the lower end of the prior guidance range due to COVID-19 restrictions instructed by the governments in Quebec and South Africa.
Whilst gold production was down on the previous quarter, it was in line with expectations and reflected planned maintenance shutdowns and lower grade ore feed to the mill. Newcrest Newcrest reaffirmed FY20 guidance, noting the increased risks to the general operating environment presented by COVID-19.
Northern Star experienced unavoidable disruptions to normal operations on account of COVID-19 and reported March quarter production 10-15% below expectation. The company gave no assurances about production levels in Northern Star the June quarter, which will likely continue to be impacted by new staffing measures and COVID-19 travel restrictions.
South32 maintained FY20 guidance for the majority of its operations, noting production and sales had been largely South32 unaffected by COVID-19. Guidance was removed for operations in South Africa and Colombia and lowered at Australia Manganese by 5%.
COVID-19 Disclosures: Capex and Exploration
Company
BHP noted that major projects under development in petroleum and iron ore were tracking to plan. However, the Spence Growth Option and timing for completion of the shafts at Jansen are under review. While not quantifying BHP guidance, the company highlighted the flexibility it had in its capital and exploration expenditure and noted FY21E guidance would be lower than US$8b.
Rio guided to capital expenditure of $5-6b in 2020 (down from the previous guidance of $7b) partly due to COVID- Rio Tinto 19 constraints, and partly due to the favourable currency impact from the strong US dollar. The company also flagged the potential for deferral of 2020 capex into 2021 and 2022.
Woodside announced a ~50% reduction in total expenditure in 2020, including a ~$100 million reduction in opex Woodside and ~60% reduction in investment expenditure to $1.7–1.9 billion. Changes included the deferral of most exploration expenditure and the targeted Final Investment Decision for Scarborough, Pluto Train 2 and Browse.
South32 announced reductions in sustaining capital expenditure of US$150m and exploration activity of US$10m. South32 The Company is reviewing its development options with the PFS at Hermosa now expected to be concluded in the September quarter and work underway to preserve the value of the Eagle Downs Metallurgical Coal investment.
OZ Minerals announced its business review had led to the deferral of ~$150m in overall growth capex, exploration, OZ Minerals and project study expenditure with flexibility to defer beyond 2021 if required.
Santos reduced capital expenditure by $550 million, including $200 million in the base business and $350 million Santos in major growth capex. Discretionary expenditure and exploration programs were also deferred where appropriate.
Whitehaven announced it would be cautious in allocating capital to expansion and does not expect to consider Whitehaven making a Final Investment Decision in relation to any key projects in 2020.
Source: Company announcements. 9
9 Quarterly Focus: COVID-19 Update
The economic fallout from COVID-19 is impacting the pricing and outlook across a number of commodities, which may have flow on effects to mine profitability and investment decisions over time. However, explorers have continued to raise capital with numerous well supported issues completed, particularly in the gold sector which remains buoyant.
Impact on Commodity Prices Impact on Commodity Price Outlook
From 28 February 2020 to 30 June 2020 Change in consensus forecast from 28 February 2020 to 30 June 2020
(0%) Iron ore 19% Iron ore 2020 2021 (1%) 10% Gold 15% Gold 10% (12%) Copper 8% Copper (8%) (6%) Silver 4% Silver (2%) (15%) Nickel 3% Nickel (10%) (14%) Zinc (1%) Zinc (11%) Lead (14%) (6%) Lead (11%) Brent (17%) (35%) Brent (22%) Thermal (22%) (1%) Thermal (16%) HCC (26%) (11%) HCC (4%) Lithium (27%) (19%) Lithium (11%)
Selected Exploration Capital Raises
(Discount) Amount Date / Premium Status Company Commodity Type Raised Purpose Announced to Last (A$m) Price (%)
Advancing resource growth and development on the 15-Jun-20 Complete Vango Mining Gold Placement $15 (20%) Company’s Marymia Gold Project Increase interest in the Youanmi OYG JV and 27-May-20 Complete Rox Resources Gold Placement $13 (11%) accelerate exploration programs across gold and nickel projects Chalice Gold Fund systematic exploration activities at the Julimar 14-May-20 Complete Polymetallic Placement $30 (4%) Mines NiCu-PGE Project in WA
28-Apr-20 Complete De Grey Mining Gold Placement $31 (10%) Fund ongoing exploration
25-Mar-20 Complete Bellevue Gold Gold Placement $27 (8%) Fund infill and Resource extension drilling
Source: Company announcements, FactSet. 10
10 Quarterly Focus: COVID-19 Update
Construction activity has continued as an essential service throughout the pandemic, with the sector in the midst of a significant increase in infrastructure spending. Federal and state governments have also recently announced a range of initiatives prioritising "shovel- ready" projects that can begin within 6 months and stimulate job creation in metro and regional areas. Projects are across transport and social infrastructure, and appear to primarily be an acceleration of existing projects rather than increasing budgets.
Government Infrastructure Announcements During COVID-19
Total Date State Policy Value Details Announced (A$b)
Plan includes $1.5 billion additional funding for priority projects identified by states and the territories. • $1 billion will be allocated to shovel-ready projects that can commence Commonwealth 15 June 2020 JobMaker 1.5 within 6 months • $500 million for targeted road safety works delivered by states and territories than can be completed within 12 months.
A $3 billion acceleration fund to go towards job-creating projects, increasing the Government’s infrastructure pipeline to a guaranteed $100 billion. Infrastructure The fund will be used for smaller, shovel-ready projects, including: New South and Job • $673m for the Tweed Valley Hospital works 31 May 2020 3.0 Wales Acceleration • $749m for the relocated Sydney Fish Markets Fund • $240m for the Pinch Point Program – addressing congestion impacting freight and bus services on the Sydney metropolitan road network • $382m for repairing, maintaining or seal priority council roads • $398m for road safety projects in regional areas.
The Building Works package provides funding towards shovel-ready projects, including: • $1.18 billion in education infrastructure projects • $382 million for upgrades, maintenance and new experiences at tourism Building works Victoria 18 May 2020 2.7 destinations package • $328 million for transport projects including roads, rail and local pier upgrades • $100 million for the upgrades of CFA and SES stations, disability accommodation, mental health and aged care facilities across Victoria.
The package includes: • $415 million funding for shovel-ready infrastructure projects including the Queensland Burke and Developmental roads and smaller works across the regional Economic Queensland 19 May 2020 0.8 network Recovery • $200m to increase resilience, widen and seal key freight routes and Strategy upgrade older bridges and culverts • $200m new funding for a range of minor road upgrades
• Projects along Great Eastern and Bussell Highways, Exmouth Road and Toodyay Road Western • Regional State Road Safety Improvement Program to widen, seal or 21 June 2020 NA 0.2 Australia install line markings on more than 20 regional routes • Fast tracking the tendering of $2.37 billion in large scale road projects such as the Bunbury Outer Ring Road.
Note: Investment values for state government initiatives are inclusive of contributions from the federal government. 11
11 Quarterly Focus: COVID-19 Update
Over 80% of index constituents have now made some form of COVID-19 release, up from around 50% at the end of March. The industry has proven quite resilient to date, with company disclosures continuing to report relatively limited disruptions. While many companies withdrew earnings guidance amidst the initial uncertainty, more than half of those have now either reinstated previous guidance or issued revised forecasts. Similarly, several companies that initially deferred their 1H20 dividend have recently brought payment forward again.
COVID-19 Disclosures: Frequency and Content
Disclosure Frequency Disclosure Content
30 28
5 24 9 22 22 20 19 50 15 constituents
9 21 8
Little/No Future Current Taskforce New Cost controls No COVID-19 release financial impacts operating established procedures impact to date expected or impacts 1 release uncertain specified 2 releases Guidance Dividend Business Impacts Response Balance Sheet Withdrawn Deferred Strength 3 releases Commentary
COVID-19 Disclosures: Subsequent Disclosures
Impact on Earnings Guidance Impact on Dividends
No update 9 No update 6 Total Total 20 Revised 9 guidance 6 Dividend Guidance brought reinstated forward 5 3
Guidance initally withdrawn Subsequent disclosures Dividend deferred or cancelled Subsequent disclosures
Source: Company announcements. 12
12 Gresham’s Credentials
Landmark Mergers & Acquisitions
2018 2016 2015 2014 2014 2013
Advised Advised First Lead Advised the Wesfarmers on State Super on Independent Advised Bank of Advised Boral on Lonsdale the sale of its its acquisition of financial adviser Queensland on the formation of Consortium on underwriting and the land titles to the Board of the acquisition of a US$1.6bn joint the acquisition of insurance and registry BHP Billiton on $2.5bn loan venture with a 50-year lease broking functions of Land the demerger of portfolio from USG Corporation of Port of businesses Use Victoria South32 Investec Melbourne
Mining and Infrastructure Services
2019 2019 2018 2017 2017 2016
Advised CHAMP Adviser to Lend Adviser to Adviser to Advisor to SCEE Adviser to QIC on and Frontenac Lease on the sale Barminco on its Quadrant on the in relation to the the acquisition of on the sale of H- of its Engineering acquisition by sale of CQMS acquisition of Pacific Energy E Parts business Ausdrill Razor Heyday5 International
Takeover Response
2017 2017 2016 2014 2013 2011
Advised DUET Advised Asciano on Group in relation Advised Little Advisor to UGL in its takeover by a Advised David Advised Fosters to its $13bn World relation to its consortium led by Jones in relation on its $12.3bn takeover by a Beverages on takeover by Canada Pension to acquisition by takeover by consortium its acquisition CIMIC Plan Investment Woolworths SABMiller comprising CKP, by Lion Board CKI and PAH
Awards & Accolades
Excellence in 2011 M&A Deal 2009 Most Secondary Market Equity Raising of 2007 Best M&A Best M&A Deal Corporate of the Year Innovative Deal the Year Deal in Australia Advisory - 2012 SABMiller’s Babcock & Wesfarmers’ Wesfarmers’ Wesfarmers’ Boutique / acquisition of Brown $2.6bn equity acquisition of acquisition of Independent Foster’s Group Infrastructure’s raising Coles Coles recapitalisation
13 Contact Details
Chris Branston Charlie Graham Matt Keenan Executive Director, Perth Managing Director, Sydney Managing Director, Melbourne E: [email protected] E: [email protected] E: [email protected] T: +61 8 9213 0290 T: +61 2 9224 0247 T: +61 3 9664 0353
Michael Smith Neville Spry Mark Stevens Executive Director, Perth Managing Director, Sydney Managing Director, Melbourne E: [email protected] E: [email protected] E: [email protected] T: +61 8 9213 0286 T: +61 2 9224 0237 T: +61 3 9664 0381
Gresham Advisory Partners Limited ABN 88 093 611 413
Level 3, 28 The Esplanade Level 17, 167 Macquarie Street Level 39, 120 Collins Street Perth WA 6000 Sydney NSW 2000 Melbourne VIC 2000 Telephone: +61 8 9486 7077 Telephone: +61 2 9221 5133 Telephone: +61 3 9664 0300 Facsimile: +61 8 9486 7024 Facsimile: +61 2 9221 6814 Facsimile: +61 3 9650 7722
www.gresham.com.au
Terms and Conditions
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