Matt Chambers | September 20, 2008
WITH its shares off more than 50 per cent since the start of June, Straits Resources has ditched plans to split into separate metal and coal mining companies, citing poor market conditions.
Earlier this month, Straits said it was on track to spin off its Indonesian coal assets into Singapore-listed subsidiary Straits Asia Resources, which would then also be listed onthe Australian Securities Exchange.
But those plans have been undone in the past couple of weeks and yesterday Straits said the deal was off.
It also gave no indication if the plan, announced in April, would be revived at a later date.
"The existing volatility and uncertainty in the markets have changed the dynamics of what was originally contemplated," Straits chief executive Milan Jerkovic said.
Shares in the company fell to an 18-month low after the announcement.
A shareholder meeting of Straits Asia to approve the restructure was cancelled, as was the sale of Madagascar and Brunei assets that Straits Asia had agreed to buy from Straits Resources.
There would also be no dual listing of the Singapore company, Straits said.
Straits Asia chief executive Richard Ong said he agreed the deal was not as compelling as when it was inked.
Mr Jerkovic said: "The Straits Asia business continues to perform strongly and in our opinion is undervalued.
"We are committed to fulfilling the significant value potential of the Straits Asia assets for our shareholders and will continue to work hard to achieve this," he added, saying both companies would continue to explore "value-enhancing transactions".
The company, which did not return calls yesterday, said earlier this month that after the demerger, its smaller metals business would seek to grow by acquisition and that nickel, zinc and lead assets were starting to look attractive and could be undervalued.
Straits shares, which climbed as high as $8 at the end of May, ended down 27c, or 7.5 per cent, yesterday at $3.30, their lowest close since February last year.
