Noble Group Seeks More Mongolia Coal DealsBy Yuriy Humber -Feb 28, 2011
Noble Group Ltd, the Hong Kong-basedsupplier of energy, food and mining commodities, sees Mongoliaas its next opportunity to expand in coal and build on itsrecord 2010 profits.
“We have staff looking at several opportunities” inMongolia, especially in exploration companies, Chief ExecutiveOfficer Ricardo Leiman said on a conference call yesterday.“Mongolia will be an area specifically for quarter two. We lookat developing a similar model there to what we have in Indonesiaand Australia.”
Noble won exclusive overseas marketing rights for PT BerauCoal, Indonesia’s No. 5 producer, in November, adding to itsAustralian assets, which include Gloucester Coal Ltd. The Beraudeal will “contribute nicely” to 2011 earnings, Leiman saidafter his company posted record annual net income of $606million from $57 billion in sales.
Aspire Mining Ltd., which explores for coal in Mongolia,said Jan. 17 that Noble bought 4.1 percent of its shares and isin preliminary talks on how the two can cooperate. Xanadu MinesLtd., which plans to develop coal and iron ore fields inMongolia, said Feb .3 it has struck an alliance with Noble. Thecompany has an office in Mongolia and ships coal from the region,Leiman said.
Noble climbed 6.3 percent to S$2.18 at 9:57 a.m. inSingapore trading for its biggest gain in more than five months.The company led gains in commodity suppliers in the city-state,with Olam International Ltd. gaining 1.4 percent and Golden AgriResources Ltd., the world’s second-largest palm oil planter,adding 3.9 percent
‘Well Positioned’
Noble completed 28 deals worth $3.37 billion since January2000, according to data compiled by Bloomberg, as the companytransforms the business from trading to buying and running someenergy and food producing assets. Founded by billionaire Richard Elman, aformer Southeast Asia chief at 110-year-old commoditiestrader Phibro, Noble counts China’s sovereign fund amongshareholders.
Noble is “well positioned to leverage its supply chain toexpand our business further,” Leiman said.
Commodity prices have jumped as adverse global weather,from droughts in Russia to floods in Pakistan, hurt wheat,rubber, cotton and palm oil harvests, and disrupted the flow ofcommodities including coal and iron ore over the past six months.The Thomson Reuters/Jefferies CRB Index of 19 raw materials rose16 percent in the last three months of 2010, the fastest sincethe second quarter of 2008.
Higher prices for its commodities, which include coffee,cotton, grains, coal, iron ore, oil, and aluminum, helped Nobleto triple profit to $247.4 million in the three months ended Dec.31, from $84.9 million a year earlier, the Singapore-listedcompany said in a statement to the stock exchange yesterday.Sales rose 82 percent to $17.4 billion.
Stock Price
Until today, the earnings and price gains hadn’t filteredthrough into the stock. In the 12 months before today, Noble hadfallen 0.7 percent, compared with a 10 percent gain in Olam, anddouble-digit growth of Japanese trading houses including Marubeni Corp., Itochu Corp., and Sumitomo Corp.
“Noble didn’t show great profit growth despite all thecommodity price increases” in the first part of last year, saidJames Koh, an analyst with brokerage Kim Eng Holdings Ltd.“They are spending a lot of money building assets which are notquickly earnings accretive and their profits are also comingfrom a very high base due to the great 2005 to 2008.”
Returns
Returns on Noble’s acquisitions will become apparent in 18months, Leiman said. The company is “committed” to keeping itsinvestment grade credit rating and will evaluate asset purchasesand borrowings with this in mind, Chief Financial Officer Robert Van Der Zalm said on the conference call.
Noble gained control of Gloucester Coal in Australia’s NewSouth Wales state in 2009 and also owns Donaldson Coal, a mineroperating in the same region. The supplier’s energy businessaccounted for 65 percent of revenue last year.
The unit’s earnings will grow in 2011 with help from newlyacquired assets, such as Sempra Energy Solutions, a power andgas operator in the U.S., Van Der Zalm said. Rising energy andagricultural commodity prices are not tempering demand inemerging markets, Leiman said.
Noble will decide on paying dividends in “the next fewmonths,” Leiman said.
To contact the reporter on this story:Yuriy Humber in Tokyo atyhumber@bloomberg.net