The Sydney Morning Herald from Sydney, New South Wales, Australia • Page 19

15 The Sydney Morning Herald, Friday, Aug 24, 1979 15 Loss of smelter contract baffles CSR and I rani Die Why did Pechiney get the go-ahead? vie for big Ampol stake By J. N. PIERCE A week after it was shuffled to the bottom of the pack in the multi-million-dollar aluminium smelter game, CSR Ltd still does not know why its Australian-Swiss Nabalco proposal was rejected in favour of the French Pechiney plan. Pechiney was awarded the last remaining block of NSW electric power available for aluminium smelting, the other block having been given earlier in the year to the US-Japanese Alumax group's smelter. Rubbing salt in its wound, CSR is understood to have been told by the NSW Government that it is highly unlikely that electric power will be available for its smelter before 1987.

An opportunity to spell out the reasons for the smelter decision in detail was side-stepped by the Premier, Mr Wran, on Wednesday when two questions one referring to claims of corruption were put by the Opposition in the Legislative Assembly. Mr Wran replied that the smelter decision had been made only after careful examination and that the Government believed that granting the Pechiney application would be of more advantage to NSW, as well as to Australia's export trade and balance of payments. The explanation stopped there. On purely nationalistic grounds, CSR had appeared- to have had a strong edge over Pechiney in that six of the seven partners in its Gove Alumina subsidiary are NSW com- parties and that its smelter would be Australian-managed. But on other considerations, it is clear that me Government's decision was a hard one to reach.

Both groups were prepared to offer at least 50 per cent Australian ownership. The foreign element in the CSR smelter would have been its Alusuisse partner and Japanese companies. Pechiney is still in the discussion stage with Australian institutions and companies and is hopeful of attracting BHP. (BHP, which has had a long association' in the Mount Newman iron ore joint venture with Am ax, the US parent of Alumax, has yet to decide who will smelt its share of alumina from the proposed Worsley bauxite refinery.) Although CSR began its initial studies in 1974, the opening of its detailed discussions with the NSW Government in May, 1978, appear to have roughly coincided with Pech-iney's negotiations. The 220,000 tonne-a-year capacity of the Pechiney smel ter, to be reached in two stages by about 1985, is larger than CSR's proposed 150,000 tonnes, although CSR's plan called for an ultimate doubling to 300,000 tonnes.

It is possible that Pechiney, already operating smelters in six overseas countries outside France, was able to make a more polished sales presentation to the N9W Government. It is also possible that the Government felt that Pechiney a 20 per cent partner in the Gladstone alumina refinery from its inception and a long-term mineral explorer in Australia might feel inclined to extend its NSW activities if it had a smelter here. The group is a major metal fabricator as well as a primary metal producer and is a leading manufacturer of basic chemicals. A third possibility is that Mr Wran, with only enough near-term electric power for two new NSW smelters, has adroitly increased the longer term chances for a third. Had either Alumax or Pechiney been rebuffed, they could Mr Wran have gone away and not returned.

CSR, on the other hand, does not have the same degree of mobility. If it builds its smelter, the most probable location is still NSW. Meanwhile, the reference to "corruption" raised in State Parliament has been traced to the 250,000 circulation German language daily, Tages Anzeiger, published in Zurich the headquarters of CSR's Alusuisse partner. After referring to Alusuisse's defeat by Pechiney, the newspaper waspishly said: "One would like to be certain that this has not been obtained by graft and corruption." The suggestion was promptly dismissed in Sydney yesterday by Pechiney's permanent delegate in Australia, Mr Xavier Nosten, who has been involved in the smelter negotiations since their outset. "I don't remember ever offering an Australian politician even a cup of coffee," he said.

Where will it all end? By MALCOLM WILSON, Financial Editor Who would ever have thought that the decision some weeks ago by Mr Robert Holmes aCourt to buy a large stake in Ansett would lead to the present situation? In the few weeks since Mr Holmes aCourt began his buying of Ansett shares, Ampol has spent $26 million acquiring a 20 per cent interest in Ansett; Ansett replied and spent $25 million in getting 20 per cent of Ampol. Now Brambles and Pioneer Concrete are in the market for Ampol shares. Both have said that they are looking for 20 per cent and by the time they have finished they will have each invested more than $29 million. Is there any method in this apparently mad share buying spree? Or has this spectacular display of share market fireworks been put on mainly for the benefit of the sharebroking community? Of all the share market buying activity, only that of Mr Holmes aCourt and Pioneer Concrete appear to have any well thought-out strategy behind them. Mr Holmes aCourt clearjy saw his investment in "Ansett as a means of gaining a significant say in the running of the company.

Also Pioneer Concrete's head, Sir Tristan Antico, -can reasonably justify his company's purchases of "-Ampol shares on the basis of protecting its interests in Kathleen Investments and in the Mt Arthur coalmining venture, in which Ampol and Pioneer Concrete are fellow shareholders. Higher return And Ampol's decision to move in and acquire 20 per cent of Ansett had some logic behind it in that Ampol had the ready cash available and presumably feels that its Ansett shares will earn it a higher return than in investing its money in more service stations or refineries. But some of the other sharebuying has had an air of irrationality about it. In particular, Ansett's response to Ampol's buying of it seemed more of a personality power play than anything else. The only noticeable beneficiaries so far have been the stockbrokers, who will have done more than $130 million worth of brokerage business in Ampol and Ansett shares by the time that Brambles and Pioneer Concrete complete their buying orders.

The big buyers of the shares would have paid brokerage of only 0.5 per cent on that part of an order which is greater than $500,000, so the total 'brokerage paid by the buyers would have been of the order of $650,000. But the sellers of the Ampol and Ansett shares have ruostly been small shareholders, and most of these would have generated brokerage at the maximum ra'e of 2.5 per cent, for a total selling brokerage of $3.25 million, and for a total overall figure of no less than $3.8 million. So if your broker looks well fed these days, it is likely that he has been participating in the huge turnovers in Ampol and Ansett shares. AMPOL 7oo Infill 10 TED HARRIS lONEER BRAMBLES A CONCRETE 5jf 20 20 ll MR WARWICK SIR TRISTAN H01CR0FT ANTICO ANSETT Afjk 16 I 12.5 SIH REGINALD ANSETT ELL TNT "4 rGRUP By VICKIE SMILES Pioneer Concrete Services Ltd, revealed yesterday as the "friends" of Ampol Petroleum Ltd, has launched itself into a furious battle with Brambles Industries Ltd as both companies aim for 20 per cent control of Ampol. The chairman and managing director of Pioneer Concrete, Sir Tristan Antico, announced yesterday that Pioneer had been the major buyer of Ampol shares through Melbourne broker J.

B. Were Son. He later confirmed that Pioneer Concrete was seeking 20 per cent, representing some 29.5 million shares and a bill of almost $30 million. Pioneer's disclosure was prompted by an announcement from the managing director of Brambles, Mr Warwick Holcroft. that Brambles was the party behind the order for 20 million Ampol shares placed with Ord Minnett, and announced to the exchanges on Wednesday morning.

The order for 20 million shares represents only 13.5 per cent of Ampol's issued capital but Mr Holcroft later confirmed that Brambles was also aiming for 20 per cent. Just over $4 million Ampol shares were traded nationally with Pioneer's broker J. B. Were dominating the market. Deducting the J.

B. Were special of 3.9 million shares booked over from the previous night, Melbourne turnover totalled 633,338 shares, plus a late special, also done by J. B. Were, of 1.5 million shares. Sydney turnovers in Ampol reached 1,905,403 shares including a special crossed by Peter Hains Company of 757,900 at $1 each.

General Credits holds back CB A SHARE MARKET Newcomers prosper in vigorous trading i MR ROBERT HOLMES aCOURT SIR PETER ABELES "FRIENDS" OF ANSETT With national share markets stimulated by the Federal Budget, attention was switched yesterday to two newcomers Oil Company of Australia and Mistral Mining. When trading finished for the day, brokers reported an enthusiastic response with investors pushing ruby miner Mistral's fully paid 20c shares to 80c at the close and Oil Company of Australia's (OCA) contributing 25c More complications The frank Reserve Bank General Credits Holdings Ltd's first profit reversal in 17 years held the Commercial Bank of Australia Ltd group to a 23.7 per cent rise in net profit in the year to June 30. The net profit of the CBA's wholly owned finance arm fell by 8.5 per cent to $13.2 million in 1978-79, while the net profit from the group's banking activities rose 47.9 per cent to $21 million. The group net profit was $36.3 million (previous year $29.3 million). This was achieved on group income which rose 16.9 per cent to $559.9 million ($479.1 million).

In the first half of 1978-79, group profits rose by 38.9 per cent while General Credits' net profit rose by 7.7 per cent. In the second half, General Credits' earnings fell by 24.3 per cent and the group result rose by only 11.1 per cent. General Credits' volte-face is linked to business conditions in the finance industry during the year and to the rise, from $580,000 to $2 million, in its provision for doubtful debts. In 1977-78, the financier contributed 48.9 per cent of the group's net profit, but with strong rises in the banking and other non-banking profits, this proportion is now down to 36.2 per cent. The net profit of the CBA's insurance, travel and investment and financial services operations rose by 173.6 per cent to 2.2 million in 1978-79 (previous year Mr Kimpton shares to 27c.

Potter Partners, which handled the OCA float, reported buying orders spread across almost all other broking houses. The combined turnover in Sydney and Melbourne was 3.13 million shares and 2.75 million options which closed at 13c each. OCA shares opened at 27c and quickly moved to 29c before settling back to close at 27c with sales at 26c. Traders were tipping that the Dollar up The Australian dollar's trade-weighted index of value continued its climb yesterday with an increase from 83.4 to 83.5 the highest point since early October. At the same time, the middle rate for the Australian dollar in terms of the US dollar moved up from SUS1.1275 to While stock market sources shook their heads in bewilderment as to why Brambles had entered the fray for Ampol shares confusion also abounded as to the intentions behind serious bidding by brokers Peter Hains and Mears Philips in Sydney and Potter Partners in Melbourne.

Most observers felt that the Peter Hains special went to Brambles, giving the company a 1.2 million shares slice of the Ampol action yesterday and a total holding so far of about 10 million shares. J. B. Were is understood to have picked up about 2.2 million shares for Pioneer Concrete yesterday lifting its interest to about 14 million shares equal to 10 per cent of Ampol's issued capital. The re-entry of Potter Partners, believed to have scooped up about 200,000 Ampol shares yesterday, was a mystery.

Potter Partners acted for Ansett Transport Industries in the recent Ampol versus Ansett battle which culminated in both companies acquiring 20 per cent of each other and agreeing to buy no more. Discussing the Ampol versus Ansett battle in Melbourne last week, Sir Reginald reportedly said to a friend that: "When you poke an old bear in the eye with a stick, you have to make sure that the stick is longer than the bear's arm." The persistent buying by Meares Philips, thought to have acquired some 200,000 Ampol shares yesterday, added further complications to the battle although observers suggested that they were also acting for Brambles. But the most significant comment surrounding yesterday's battle royal was what do the shareholders of Brambles and Pioneer Concrete think about their companies spending $30 million for a slice of Ampol? By ROSS GITTINS, Economics Editor The Reserve Bank has joined the move towards greater frankness in Government statements in its annual report, issued yesterday. Its account of developments in monetary conditions during last financial year shows a degree of candour that was missing from statements by Government ministers at the time. And it offers advice to the Government in a section which begins: "In the interests of improved conduct of policy in the future, it is useful to look for the places where economic policy may have had a part in some of the less welcome developments in 1978-79." It says that for some years the size of Budget deficits has made it harder to achieve firm ness in monetary conditions, with the result that interest rates have been higher than otherwise necessary and bank credit has been unduly restricted.

It adds that the forecasts in the 1978 Budget were ambitious and it is now clear that too little provision had been made for contingencies. "Some of the unforseeen events pushed monetary developments well off a desirable course. The position at year's end was hardly an ideal one from which to enter 1979-80. "Monetary expansion needs to be moved back firmly." The report says that falls in private interest rates in the first half of the year occurred "in a climate of official encouragement of and at times pressure for interest rate reductions." Despite Government denials during the course of the year, the bank admits that the Budget deficit "looked on a trend basis to be running ahead of the Budget projection for the year as a whole." Little attempt is made to disguise or excuse the delay between the time when "demand for all but the shortest Government securities dried up after October" and the Government took firm action to raise official interest rates after the Treasurer's statement on monetary policy on April 22. The bank notes that while last year's total Budget deficit blew out by about $520 million, the more significant domestic deficit overran by about $780 million.

And while the money supply grew by 11.8 per cent using the most popular definition, M3, broader measures which include deposits at building societies, money market corporations and finance companies grew at an even faster rate. Australian Guarantee stock was "cheap at 27c. With the apparent success of its debut, OCA's performance today depends to a degree on London's attitude overnight. In light of the Budget decision to extend the scheme of tax rebates for share capital subscribed to onshore exploration and development (previously is was just offshore), an interesting situation has arisen between OCA shares, which were paid for before the Budget, and options. OCA has teamed with Esso Exploration and others to explore the onshore and adjacent offshore area of Lennard Shelf, Western Australia, and in the Denison Trough area of the Bowen Basin in Queensland.

Mistral opened in Melbourne at 45c and in Sydney at 50c and climbed steadily throughout the day with each parcel of 1,000 sold. epco profit soars The 46th Beneficial The CBA's chairman, Mr S. M. Kimpton, identified four main reasons for the strong rise in the group's banking profits in 1978-79. He said the CBA achieved higher interest margins "reflecting the redeployment of funds previously held in statutory reserve deposits into higher yielding advances, and an increase in the proportion of total deposits held as interest-free current accounts." The average SRD ratio was much lower in 1978-79, fluctuating between 3.5 and 5.5 compared with a range of 4 to 8 in 1977-78.

Another factor was "higher interest recoveries respect of prior periods." The bank also received improved returns from its overseas operations, particularly New Zealand and New York, he said. As well, the group's cost control had improved during its latest year. The group tax bill rose by 33.8 per cent to $26 million ($19.4 million) after TSVA relief of $219,000 Extraordinary gains in the latest year fell -to $629,000 ($1.4 million) and mainly consisted of a $578,000 capital profit on the sale of premises outside the group. Interest paid rose by 12.4 per cent to $295 million ($262.4 million) and depreciation rose 24.8 per cent to $6.5 million ($5.2 million). The group will celebrate its higher earnings with an increase in final dividend from 8c a share to 9.5c a share.

The tive Rcoco Melbourne-based auto-equipment group, Ltd, recorded a 37.4 The total turnover in Melbourne was 95,000 with Roach, Ward, Guest and Co picking up 50,000 from Meares and Philips, who handled the Mistral float. The turnover in Sydney was 53,000 shares. Thev opened at 50c and quickly business in 197879 were automotive original equipment and the international division. Sales of the latter division rose by 26.5 per cent to $53 million, while the 7.4 per cent rise in registrations of passenger vehicles helped the former division to grow by 32.4 per cent to $79.3 milion. During 197879 sales of components, equipment and services to Repco's biggest market the after-sales market rose by 17.3 per cent to $223 million.

Buoyant rural conditions helped industrial and agricultural sales to rise by 22.7 per cent to $29.7 million Final dividend is up lc at 5c a share. In addition, contributions to turnover and profits came from the inclusion, for the first time, of the full year's results of both Century Batteries Pty Ltd and Ampol Repco Finance Ltd. Century, a wholly owned subsidiary of Repco, was acquired in June. 1978, the month in which Repco spent about $18 million buying a half-share in Ampol Repco Finance. The contributions were not specified in yesterday's announcement, but Ampol Repco earned a net profit of $577,000 in the nine months to March, 1979, and Century's net profit in the year to June, 1978, was $1.3 million.

A divisional breakup of the latest result shows that in sales terms the fastest growing areas of Repco's rose to close at 80c with the Sulk of per cent rise in net profit to $23.4 million in the year to June 30 and will pay a higher dividend. The size of the latest profit rise partly reflects the fact that Repco's profit fell by 7 per cent in 197778, largely due to the Victorian power strike. Nevertheless, the latest result is a record. The directors said yesterday that "a substantial increase in demand in all sectors of the company's business" was an important factor in the 21.8 per cent rise in turnover to $396.5 million. sales between 70c and the closing price.

The seeming success of the two floats, and in particular the Mistral float, came as a surprise to most market circles. Esewhere. profit-takers moved in a it I late in the afternoon session, but this did not undermine the underlying strength. three ways to invest! Notes at call after 3 months More finance news Page 17. $13m work begins on salt project rebuild CRONULLA 6 G00BARAH ROAD FIRST CHARGE DEBENTURE STOCK FIXED TERM 3-4 YEARS 11.75 2 YEARS 1125 12 MONTHS 10.75 6 MONTHS 10 25 FIRST CHARGE DEBENTURE STOCK OPTIONAL REPAYMENT WnH THE RIGHT TO WITHDRAW UP TO 15th EACH YEAR 5 YEARS 11.75 UNSECURED DEPOSIT NOTES FIXED TERM 3 YEARS 12.00 2 YEARS 11.75 12 MONTHS 11.25 6 MONTHS 10.75 will only be accepted on the printed lorm attached to the Prospectus available from Underwriters-J Were Son tmembers ol The Stock Exchange of Melbourne Ltd.) All members of the Stock Exchanges All branches of The National Bank of Australasia Lid.

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Interest rates per cent per annum. 1 LIMESTONE PROCESSING OPERATION AND MICRONISING PLANT For Sale by Tender as a Going Concern A Limestone Processing Operation at Tabulam drawing raw material from its own leases in northern New South Wales and a Micronising Plant at Smith-field in Sydney. TENDERS are Invited for the purchase of assets of Consolidated Lime Industries Limited (Receivers and Managers Appointed). ASSETS COMPRISE A limestone grinding and classification plant consisting of Williams Mill with Mogensen screen, air conveyors and silo mining leases office, laboratory, storage shed, mobile home, stocks of limestone raw material and milled product. A micronising plant located at leased premises.

SEPARATE TENDERS may be submitted for the operation at Tabulam and the operation at Smithfield. FOR INSPECTION, supply of tender forms and general information contact Mr McGrath at Messrs Hungerfords Phone (02) 221 2244. TENDERS CLOSE 5.00 pm Friday 21 September 1979. The highest or any tender not necessarily accepted. Hungerfords Chartered Accountants 167 Macquarie Street, Sydney, NSW 2000.

EXECUTIVE RESIDENCE 4 BEDROOM facilities at Cape Cuvier, near Carnarvon, Dampier Salt will upgrade production facilities at its Dampier salt fields. In announcing Dampier Salt's intentions yesterday, the West Australian Minister for Industrial Development, Mr Mensaros, said the Lake MacLeod workforce would be built up to 120 permanent jobs by mid-1980. Mr Mensaros said a construction workforce of about 40 would be employed to build the Cape Cuvier facilities and another 10 workers would upgrade production facilities at Lake MacLeod. The extension to the jetty and building of the improved ship loader will lift the capability of loading ships at Cape Cuvier from 65,000 dwt before the cyclone to 100,000 dwt. Since the cyclone and while the Lake MacLeod project was put on a care and maintenance basis, Lake MacLeod markets in Japan, Korea, Taiwan and South East Asia were kept supplied by the Dampier salt fields.

Work on rebuilding and upgrading the Lake MacLeod salt project near Carnarvon in Western Australia, which was destroyed by a cyclone in March, is about to begin at a cost of $13.7 million. The project is controlled by Conzinc Riotinto of Australia Ltd. Since it was put out of action by Cyclone Hazel it has been operating on a care and maintenance basis. Although the cost of rebuilding exceeds original estimates, Dampier Salt Ltd which is nearly two-thirds owned by CRA and the rest by Japanese interests has seen the need for the earliest possible restart to the project. The project is expected to be back in operation by the middle of next year.

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