MYR Myer Holdings Limited

Shares in Aston Resources Ltd. (AZT.AU) slid 4.7% to A$5.68 after the novice coal miner debuted on the Australian Securities Exchange on Tuesday, in a sign of continuing lackluster demand for Australian initial public offerings.

Just 4.7 million shares changed hands before the market closed, meaning the company was not even in the top 10 most-traded mining and materials companies.

The day's trade wiped A$18.8 million off the value of the offering, which had an issue price of A$5.96 a share, valuing it at A$400 million for one-third of Aston's total equity.

Chief Executive Todd Hannigan said that first-day movements would mean little to the long-term value of the company, which hopes to start producing 10.8 million metric tons a year of coal from its Maules Creek mine by 2014.

"This is a development asset so any investor in our stock should be in it for a minimum of 12 months. Whether it's down slightly or up slightly, it doesn't matter," he said.

Aston's founder Nathan Tinkler bought the mine from Coal & Allied Industries Ltd. (CNA.AU), a majority-owned subsidiary of Rio Tinto Ltd. (RIO.AU), for US$480 million at the bottom of the market in early 2009.

Tinkler, a former mining electrician turned bloodstock and mining entrepreneur, took up 35% of the equity offered in the IPO.

Aston's float was the subject of intense speculation in advance from investors concerned about the health of the Australian IPO market.

Shares in Myer Holdings Ltd. (MYR.AU) are still down nearly 10% on the listing price from their multi-billion dollar float in November.

Investor skepticism about how IPOs are priced in Australia led German construction company Bilfinger Berger AG (GBF.XE) to pull the up-to-A$1.39 billion float of its Australian arm, Valemus, in July. The float was widely seen as a bellwether for the market as a whole.

A person familiar with the deal defended the first day's performance of Aston, saying that the overall market was already down 2.3% since the deal was priced on Aug. 6 and that most of the selling had been "scraps" from retail investors and a few institutions.

"The IPO market is as good as closed at the moment, it's very challenging," he said.

He said the deal would likely have had an even harder time if it had involved a more typical broad array of institutions and retail investors, rather than the tight group of institutional shareholders on Aston's opening share register.

Another investment banker said Aston was a poor guide for future IPOs, such as the A$5 billion-A$8 billion privatization of state-owned Queensland Rail expected later this year, because of the preponderance of institutions and because the deal is in the already-hot coal sector.

Aston's valuation was cut by 20% from an original A$1.5 billion target to A$1.2 billion as other raisings, such as Gloucester Coal Ltd.'s (GCL.AU) assets-for-equity swap with its majority shareholder Noble Group Ltd. (N21.SG), sucked capital out of the market.

Australian IPOs have dwindled since their recent peak in the second half of 2005, when A$7.8 billion was raised, according to data from Dealogic.

Just A$329 million was raised in the first six months of the year, an improvement on the figures for 2008 and 2009 but still well below the A$3.6 billion raised in the first half of 2007.

Aston is only the third Australian IPO worth more than A$100 million since the global financial crisis, following the Myer float and the A$140 million carsales.com Ltd. (CRZ.AU) IPO last September.

Hannigan said that the sharp increase in the value of Maules Creek, from the US$480 million paid to Coal & Allied to the A$1.2 billion valuation of Aston, was justified by the improving infrastructure prospects for the site, 380 kilometers northwest of Newcastle in east central New South Wales state.

Port capacity at Newcastle, the world's biggest coal export port, will hit 180 million tons a year by 2014 under new investments announced by the port's major operators in recent months.

Feasibility studies by the Australian Rail Track Corporation Ltd., a government-owned infrastructure group, have also improved the prospects for rail capacity to the Maules Creek site since the sale was agreed with Rio Tinto, Hannigan said.

The company is applying for port allocation at Newcastle and expects a result by the end of the year.

The A$400 million raised by the IPO will pay for A$250 million of debt used in the purchase of Maules Creek, A$20 million in investment banking fees, and A$130 million of cash toward the project's A$463 million development costs.

Hannigan said that Aston was "highly confident" about raising the rest of that money, and was in talks with Japanese commodity trader Itochu Corp. (ITOCY) over buying a 25% stake in Maules Creek.

He said the company could also look at a U.S. dollar bond issue or project finance to pay for the remaining costs.

-By David Fickling, Dow Jones Newswires; +61 2 8272 4689; david.fickling@dowjones.com (Cynthia Koons in Sydney contributed to this article)

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