Business & Investing: Competitor and Australian private equity funds said to be interested in Villa Maria; Plus, Newsprint production to end at Tasman mill at Kawerau

Villa Maria, one of the country’s best-known wineries is seeking a new owner or investor according to a report in yesterday’s Australian Financial Review.

Swiss investment banking group UBS is understood to have been appointed to evaluate offers for the iconic, 60-year-old business founded by pioneering wine entrepreneur Sir George Fistonich.

One possible contender would be listed wine producer Delegat, owner of the Oyster Bay label, which has long harboured an ambition to create a leading global Super Premium wine company. An unknown number of Australian private equity funds are also believed to be interested.

It’s estimated Villa Maria could be worth more than $200 million, although no binding bids had been submitted yet according to the AFR.

Late last year, Villa Maria announced it was selling off 31 hectares of land at its Mangere facility to help fund international expansion. The winery is planning to expand its brand in overseas markets, such as North America and Asia.

The company has won many leading wine awards over the years and since 2014 has been named one of the world’s most admired wine brands by the international magazine Drinks International.

Bathurst Resources trims full-year guidance

Australian listed coal miner Bathurst Resources, which owns and operates three mines in New Zealand, has trimmed its full-year guidance by almost 10 percent, citing a slower than expected recovery in export coking coal prices.

The company is now expecting to report $55.4 million of pre-tax interest and depreciation earnings for the year ending June 30, down from its earlier $62.1 million forecast.

About $5.9 million of the reduction is due to a weaker performance from coking coal exports from its Stockton mine on the West Coast. Covid-19 impacts and a Chinese ban on Australian coal purchases “left more Australian product in the market and put a lid on prices”, Bathurst said in a statement to the ASX. It also noted the revised outlook reflected a 10 percent rise in the NZ dollar since October last year.

The export business realised an average $130 a tonne for the six months ended December 31, from $175 a tonne a year earlier. Bathurst said the price recovery is only now being seen, with prices rising about 50 percent last month.

New Zealand’s biggest coal miner said half-year production was 5 percent lower at 711,000 tonnes, while sales revenue fell 25 percent to $97.8 million, reflecting weaker prices and a shipment delayed into January.

Bathurst sold about 2.2 million tonnes of coal last year when it reported full year ebitda of $76.8 million. About half of that was to overseas steelmakers and 15 percent to NZ Steel.

Bathurst Resources shares closed at 0.048c on the ASX, down 5.9 percent.

Newsprint production at Tasman paper mill to cease this quarter

Kawerau’s Tasman paper mill is set to produce its final rolls of newsprint in coming months as the company begins to switch to manufacturing specialist packaging paper.

The mill, owned by Norwegian forest products company Norske Skog, began producing the new packaging material for supply to markets in Asia last month.

In October last year, Norske Skog announced a review of operations at the mill, which is a major employer in the central North Island with around 160 workers.

As a result of the rapid decline in the demand for newsprint, a range of alternative long-term options for the site are now under consideration.

Newsprint production at the Tasman Mill is expected to finish by the end of March, a dramatic turnaround from 20 years ago when newsprint was the mainstay of its manufacturing operation.

The company says the replacement “pulp on reel” product is made by drying mechanical pulp, based on roundwood and sawmill chips, through the paper machine. It can then be used to make container board for packaging, or re-pulped.

The Tasman mill currently produces about 150,000 tonnes of newsprint per year.

The move will mean local newspaper publishers Stuff and NZME will be forced to import newsprint in future.

Is silver set to be the next target for Reddit traders?

Futures contracts for silver have surged higher as the Reddit-fuelled boom in highly shorted stocks appears to be spilling over into the metals market.

Spot silver prices jumped more than 10 percent yesterday, trading at US$29.85 an ounce. It comes amid the biggest move for silver futures since 2013.

The sharp move higher builds off gains for silver and silver-related equities late last week. Silver mining stocks Coeur Mining and Pan American Silver rose 17 percent and 15 percent then.

The spike in demand for silver appears to be related to retail traders in the Reddit forum WallStreetBets, which has helped drive trading activity in heavily shorted stocks such as GameStop and AMC Entertainment in recent weeks.

The forum had multiple active threads dedicated to silver in recent days while the phrase ”#silversqueeze” was also trending on Twitter.

The move in silver was touted by investors who are bullish on cryptocurrencies and see the new digital assets in part as replacements for traditional metals.

The dramatic spikes in GameStop and other heavily shorted stocks were due in part to a short squeeze, a situation where investors who have bet against a stock are forced to buy shares to cover their positions forcing the price higher.

Melvin Capital, one of the hedge funds which originally had short positions in GameStop, lost 53 percent of its value in January.

Meanwhile, US share trading platform Robinhood will continue to limit trading this week in short-squeeze names like GameStop that have experienced explosive rallies and unprecedented volatility over the past week.

Customers can only buy one share of GameStop’s stock and five options contracts. However, the millennial-favoured stock trading app did cut down its list of restricted stocks from as many as 50 on Friday to eight.

China set to become the world’s largest economy earlier than previously predicted

China is set to overtake the United States as the world’s largest economy a few years earlier than previously forecast due to the coronavirus pandemic, according to analysts.

The US reported last week that gross domestic product in 2020 contracted by 2.3 percent to US$20.9 trillion in current-dollar terms, based on a preliminary government estimate.

In contrast, China said its GDP expanded by 2.3 percent last year to 101.6 trillion yuan (approximately US$14.7 trillion).

That puts China’s economy only US$6.2 trillion behind the US, down from a US$7.1 trillion gap in 2019.

Analysts believe the pandemic has been a much larger blow to the US economy than China’s and therefore expect, based on current growth projections, the size of China’s economy in USD terms will exceed the US in 2028.

However, if the Chinese currency strengthens further to around 6 yuan per US dollar, China could surpass the US within five years.

The yuan began strengthening against the US dollar in the past six months to levels not seen in more than two years.

Taiwan’s annual economic growth rate exceeds Chinas for the first time in 30 years

Taiwan unexpectedly became Asia’s top-performing economy last year — and outgrew China for the first time in 30 years.

It came as strong global demand for the island’s tech exports, particularly its global dominance in semiconductors, outweighed the hit from the Covid-19 pandemic.

The Taiwanese economy grew 3 percent in 2020 compared to a year ago according to advance estimates by the island’s statistics office.

It easily exceeded the 2.7 percent growth forecast by Taiwan’s central bank and edged out Vietnam’s 2.9 percent growth rate. Several economists had predicted Vietnam would be Asia’s fastest-growing economy in 2020.

Taiwan’s expansion last year was also higher than China’s 2.3 percent full year growth in 2020. The island last outgrew its giant neighbour in 1990.

The island’s strength in exports in the second half of last year — particularly of semiconductors — helped the economy to offset any drags from the pandemic, while its 2021 growth rate could exceed 5 percent this year according to some economists.

Taiwan has also had relative success in containing the spread of Covid-19, allowing its economy to avoid a strict lockdown experienced by others globally. To date, the island, with a population of 24 million, has reported just 911 confirmed infections and eight deaths, according to the Taiwan Centre for Disease Control.

Its estimated that Taiwan and South Korea now account for 83 percent of global processor chip production and 70 percent of memory chip output — which means the two East Asian economies have a near-monopoly status in both segments of the industry.

Andrew Patterson is Newsroom's Markets Editor and has worked for decades as a financial journalist, radio presenter and editor with Australia's ABC, Radio Live and NBR.

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