Metal demand boosts West Australia's economy

12:00 AM @ Monday - 01 January, 1900
The West Australian economy is benefiting from continuing demand for resources, however growth is being constrained by both infrastructure and capacity limitations.

Precious metal prices rose strongly during April with silver (27.59%), gold (9.34%), platinum (6.01%) and palladium (3.83%) all rising strongly during the month, while commodities fluctuated with rises in oil (6.78%) and iron ore (5.28%) and falls in uranium (-11.2%) and lead (-8.46%) highlighting the variations.

The extraordinary rise of silver by 27.5% during April to close at US$47.95/troy oz was influenced by many factors. One significant factor was that investors, encouraged by recent increases in value, continued to buy silver as the metal saw significant interest from the salaried class looking for safe investment havens. The recent run has resulted in the metal trading at its highest price since January 1980.

Gold followed this trend, recording a closing price of US$1,563.60/troy oz, an increase of 9.3% on March.

Oil prices have also continued to increase reflecting the uncertainty that is attributed to the supply constraint concerns resulting from instability in the Middle East and Northern Africa oil regions. The price closed at US$113.39/bbl.

“Demand for precious metals remains high due to the continuing uncertainty in the Middle East and also the increasing concern about future inflation both in Australia and overseas. Commodity prices are responding to short term issues, which is creating volatility,” said Mr Keith Jones, Managing Partner of Deloitte in Western Australia and National Head of Energy and Resources.

In his Business Outlook Report, Chris Richardson of Deloitte Access Economics highlighted major issues facing Western Australia’s economy: “It is hard for the key growth positives to gain traction – mining and engineering construction want to grow very fast, but their expansion is being dogged by slow bureaucratic and corporate approval processes as well as by skill shortages. Those skill shortages may become acute over the next two years, because Australia’s growth prospects rest on a very narrow base of sectors, occupations and States, and because policy moves are making it harder to migrate here.”

The Deloitte WA Index closed relatively flat for April at AU$195.8bn (0.2%), despite a boost from the inclusion in the index of the impact of the merger of Western Australian Newspaper Holdings Ltd and the Seven Media Group.

Most international markets closed higher, with the U.S. S&P 500, FTSE and the Nikkei posting gains during April of 2.4%, 2.0% and 1.0% respectively. The All Ordinaries bucked the international trend and fell 0.6%.

The ‘Movers and Shakers’ for the month of April were Seven West Media Holdings, Independence Group NL and Equinox Minerals Limited which posted increases in market capitalisation of 161.6%, 44.9% and 38.1% respectively.

The market capitalisation of Seven West Media Holdings closed the month at AU$3.1bn, representing an increase of AU$1.9bn during April. The increase in market capitalisation was the result of the merger of West Australian Newspapers Holdings Limited and Seven Media Group to form Seven West Media Holdings. The deal worth AU$4.1bn, is the latest move by Kerry Stokes (chairman and a major shareholder of both Seven and WAN) to consolidate his business empire.

Independence Group NL experienced an increase in capitalisation of AU$411m during the month to a close of AU$1.3bn. During April, Independence Group declared its off market take-over bid for 100% acquisition of all shares in Jabiru Metals Limited (Jabiru) as unconditional. As at the close of April, Independence Group owned over 95% of the shares in Jabiru and has applied to compulsorily acquire the remaining interest.

Equinox Minerals Limited’s market capitalisation increased by AU$1.9bn closing April at AU$6.8bn. On 25 April 2011, the Company announced that it had entered into an agreement with Barrick Gold Corporation (Barrick), whereby it agreed that the take-over bid proposed by Barrick, for cash purchase of all outstanding common shares at C$8.15 per share, is fair and in the best interests of the company.
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