Big penalties for sharemarket misconduct, BHP to sell stake in Indonesian coal project: Economy Roundup

Financial Services Minister Chris Bowen has unveiled proposals to beef up the supervisory powers of the Australian Security and Investment Commission and increase penalties for individuals and companies found guilty of market misconduct.

Under the proposals, which will not come into effect until later this year, ASIC’s investigative powers, including telephone interception and search warrant powers, will be improved.

Pecuniary penalties for individuals found guilty of market misconduct will be increased to $500,000, or three times the profit made or loss avoided, whichever is greater.

For corporations, the penalty will be the greater of $5 million, three times the profit made or loss avoided, or 10% of the corporation’s annual turnover during the period the breach occurred.

And, the maximum term of imprisonment for these offenses will be increased to 10 years from five years currently.

BHP to sell stake in mine

Mining giant BHP Billiton is planning to sell up a stake worth up to 25% in its Maruwai coal project in Indonesia, one of the company’s local units has said.

“We want to keep a majority stake in the Maruwai coal project. So we are looking at selling a 20 to 25% stake,” said Indra Diannanjaya, president director of PT Juloi Coal, one of the seven miners involved in the project.

“But if a business deal fails to take place, BHP would retain 100%. We are financially capable of developing the project,” he said.

The project, which is expected to start commercial production in 2014 with output of six million tonnes within five years, will need between US$500 million and US$1 billion.

BHP Billiton said in June last year it would not go ahead with the first stage of the project because it did not fit with the company’s long-term investment strategy, but government officials said subsequently it was opting to sell a stake.

Meanwhile, the company is facing potential trouble with the ATO after recommendations in the Henry Review include a new rent tax for mining giants, which could reportedly cost the company and Rio Tinto about $5 billion a year.

As reported in The Australian, Merrill Lynch analysts have said BHP could lose about $2.6 billion per year from 2012-16, representing about a 16% drop in full-year earnings.

“Iron ore would take the biggest hit, (which is) very much a reflection of the high margin nature of the iron ore business,” analyst Peter O’Connor said.

Shares open flat after small Wall Street rise

Meanwhile, the Australian sharemarket has opened flat today after similar results on Wall Street, where investors are concerned about the national economy due to a drop in new home sales.

The benchmark S&P/ASX200 index was up 1 point or 0.03% to 4646.1 at 12.00 AEST, while the Australian dollar also continued its decline to US89c.

Commonwealth Bank shares rose by 0.6% to $54.96, while NAB shares increased 0.2% to $26.35. Westpac rose 0.2% to $24.37, with AMP losing 1.1% to $6.29.

Commonwealth Bank of Australia has said its funds under administration jumped by 1.5% to $193 billion in the quarter to December 31.

The bank said funds under management rose to $149 billion, while insurance in force premiums fell by 5.9% to $1.5 billion, due to losing the Australian Super group scheme worth $130 million.

As reported in the Australian Financial Review, the Federal Government has said it will bring forward cuts in the upcoming budget in order to fulfil a promise to curb its spending.

Several minister have been told to expect “serious and painful” cuts over the next few months leading up to the May budget.

Elsewhere, climate change expert Ross Garnaut has said a double dissolution election is the only way for the Federal Government to see progress on climate change.

“So really, in the next 18 months, the only possibility of progress is through a double dissolution, in which the government gets legislation through a joint sitting or through a normal election with a house senate election,” he told Business Spectator.

Julia Gillard warns Woodside workers to end strike

Deputy prime minister and workplace relations minister Julia Gillard has said the 3,000 employees at the Woodside Petroleum LNG plant in Western Australia should end their strike.

Over 1,600 workers were ordered by a court earlier this week to return to work, with Gillard saying they are open to significant fines.

“My message to the workers engaged in this is that there is no excuse for unprotected industrial action,” she told ABC Radio. “They should get back to work, they should be fully performing work duties as required by their employer.”

Overseas, Wall Street stocks have remained flat after housing data showed a drop in new home sales. However, some of this drop was negated by the Fed’s decision to leave rates at historically low levels and an optimistic tone in its statement.

The Dow Jones Industrial Average gained 41 points or 0.41% to 10,236.16.