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The definition of "strategic national asset"... ever wonder what it means? If the Canadian wants to buy it, it's non strategic because people think and say so and the Canadians seem to be some nice people. But if the Chinese wants to buy it, it will become highly strategic because heck people can change their mind just like that and they are free to do so. Don't believe that? Mark this - OZL's assets will become highly strategic by tomorrow morning... and if the Chinese decide to give it up because they realise they have again overpaid for some second rate assets, and once again OZL is facing death, my bet is the "strategicness" of OZL's asset will again take on a new meaning... this time, it's called dirt, and its value will be one tenth or one hundredth of the 2.8bln the Chinese are willing to pay.


... this is one definition of "strategic national asset". But then this is my version only... there will be many, depending on the vested interests, some will never be spelt out.

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Hi henrietta,


"Ahh ....... so it wasn't the trillions of dollars of financial gambling with worthless derivatives . All they had to do was save Lehman Brothers."


At the end of the day the whole topic we're discussing is a matter of opinion, so it's hard to say either way for sure.


But there's a view out there that Lehman's collapse basically eliminated any hope that there would be a quick recovery. After the collapse people began to bunker down for a protracted period of weakness. I'd agree with this view. Indeed, even in the months leading up to Lehman's collapse, ie a good part of 2008, when it was clear the sub prime loans were a big problem, the markets were still relatively strong. The All ords was something like 5000 and the Dow was 10,000+. Today the AORDs is more like 3500 and the Dow is like 7500. That is a very precipitous drop. I'm of the opinion that while the market can be inefficient for pricing particular stocks at times, it's very good as a predictor of the broader economic picture. I believe the market rout also reflects the view that chances of a quick recovery is slim.


The implications for RIO?


I believe if the crisis was only transient it would have had minimal impact on RIO's valuation. However tack on a few more years of weakness and the valuation for the mineral assets also falls materially. Tack on leverage as well, and you've got that fall in valuation magnified significantly.


That's the point I believe many commentators have missed - it's not RIO's management that's led to the disastrous fall in the value of the company, it is the worst crisis we've had since the great depression.


I guess this will be one for the historians to judge. But I suspect various management's, including OZL's, will be exculpated with the passage of time. :)

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hi nohoper


are you intentionally misinterpreting my post?


the key is not whether it is a chinese or a canadian it is the issue of sovereign control of the entity that brings up the national interest issue.


if you read lower i cut and pasted something that does not agree with my personal opinion but i chose to post it. trying to find information that only supports my position and ignoring or hiding or not sharing contrary information is a little disingenous.


RIO's Fe ore assets are of national interest. china's need for the ore and current interest in taking a stake is proof positive. they are clearly seeing an opportunity to buy cheap (at this point of the cycle) and stymie BHP there is nothing wrong with trying but there are concerns for national interest.


Optus and Singtel had scrutiny for the same reasons. Shell got knocked on the head (despite no sovereign links but due to their pipeline of assets and likely timing of development of those assets NOT being in the national interest).


there should be scrutiny on these grounds (but they need not be reason to stop the deal going ahead).


i still believe a rights issue was the correct move for RIO shareholders.

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i still believe a rights issue was the correct move for RIO shareholders




it just shows you are the true long term value investor. we all know what's RIO has under the ground.

the problem is, if RIO go to the market ask for $19b, what sort of dilution the existing share holder will have? and sp could go under $30 that pushed by those financial sharks.

i reckon RIO asked fundies before they turn to chinalco--the last one they would ask for money. from a small share holder point of view, this is the best solution at current market condition.

it puts RIO in much better position on the nigociate table and draw out much better offer from other interested party BHP..eg....

only money talks atm!!

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No. I am not. What I was trying to do is to inject my own interpretation of terms and events which may come across as misinterpretation. In this case I believe the terms strategic and national interest have been coined and misused quite widely and they seem to mean different thing to different people but yet what they implied behind is all encompassing, ie, "it's in everyone's interest" and in Australia's interest, etc...", and with big words and big meaning such as this, many are hesitating to put their two cents in because no one likes to go against this line of patriotic and nationalistic view and make themselves unpopular. (Now, please do not take the above explanation to infer you personally, I am just explaining what I meant earlier. And if I had come across to be directing at you, my apology here. It's not intentional).


I agree any Chinese purchase of local assets will have to go through the "process" and subject to scrutiny by all interested parties and I have no qualm with it. If the RIO-Chinalco deal were to be approved, I assume no one would scream Swan is selling out Australia cheap? Fair?!


The Chinese may need iron ore, but they are not just limited to Australia. From memory, they had already sourced from the Russian for their rail. In addition, Vale is a potential supplier to provide all the iron ore they need. India may provide some alternative. The Chinese themselves have been vigorously seeking out new sources in Africa and South America... the point here is they are not limited to buying from Australia. If they want to play hard ball with our export, they can. But so far they had not. Yet.


There is an implicit assumption that the iron ore assets will be worth a lot more once the current low cycle turns, but this is just an assumption with a 50% chance of being right. What if the cycle takes multi-year to turn as in the past? Japan's rapid slump in their export and economy is alarming to say the least, worse since 1974 and this is just the beginning. The USA industrial production is right now in their midst of decline, consumer confidence is at all time low and most Americans are broke, they are not going to buy more Japanese car, it is going to be a long recession for both the USA and Japan - the impact on Australia's iron ore will be felt in the next god knows how many quarters. S.Korea would probably in the same camp as Japan.


This leaves China - Australia's last chance to get some kind of leverage to avoid a recession, and possibly a better balance of payment. Scrutinise their purchases of our national interest if we must but be fair. It's only in our interest that they are willing to invest here. By next year, their 38 bln hard credit will be worth and cost a lot more to obtain. If the credit is tight now, it will be much much worse by next year, once the USA and UK have done with their bank audit and realise how much sh** they are in. By then most people will realise the only source of "credible" credit will be from a handful of countries with Japan and China leading the pack. Do the RIO investors really want to turn down such a good offer?


Rights issue although sounds more acceptable but this will not solve the demand/market problem. Without a good market to absorb on going production and generates the necessary cashflow to pull through the hard time, there will be more rights issue to come to sustain RIO.


Selling to BHP? Well, go ahead and make Marius' day... the supply/demand equation has changed with the balance of power shifted completely to the demand side, if free market is still a good proven working concept, it is telling me that selling to BHP will not solve the imbalance.

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if RIO is really trying to shake out a higher bid from BHP why didn't they engage them at MUCH higher prices


to answer it.......timing.

if my memory is right, RIO rejected BHP bid at time when commodities traded at near peak. and RIO asked for more cash from BHP. if BHP still wishs to take control of current situation then it should at least come up with some sorta cash or scrip swarps to trump the chinalco offer, as i siad "only money talks atm".

yep if RIO drops to mid or low 40's i will make move.

my pair trade idea is low risk high reward one--which is hard come by at current market!!

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hi EB


if my memory is right RIO didn't engage at all and even went as far as saying BHP "weren't within two football fields".


strange how correct that statement appears.....


assuming a football field was about $50 then BHP's offer was about two football fields away on the other side.

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timing wolvy timing, that is the key and that is the point i'm making!! if BHP be able to know the condition we are facing now, would they bid it for $150 at that time?? so, no one sees it coming at that time right??


if BHP can come up with $70 bid now, i'm sure most of share holders will hand it to BHP with silver plate, who gives rate ass about chinalco!! agreed??

if BHP dose it, then what will happen to BHP'S sp?? and if RIO/chinalco deal go through, then what happen to BHP'S SP??

am i convinced you with my pair idea????? :P

for the nattonal interests........if our Govt. our superfund take the lead i will follow it like you do, it is very good long term investment after all. but ask yourself a question ---can we count on them???????????????????????????????????????????????????????????

if they can't or not willing to, then what should i do? i have a yong boy to raise, need to have three meal per day. what you give me a good advice what should i do????

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