Get 40% Off
💰 Buffett reveals a $6.7B stake in Chubb. Copy the full portfolio for FREE with InvestingPro’s Stock Ideas toolCopy Portfolio

UPDATE 1-Buyers ready to pounce on Rio Tinto coking coal mines -sources

Published 05/05/2017, 06:11 pm
Updated 05/05/2017, 06:20 pm
© Reuters.  UPDATE 1-Buyers ready to pounce on Rio Tinto coking coal mines -sources
CSGN
-
RIO
-
AAL
-
MGX
-
RIO
-
WES
-
HG
-
YAL
-

* Buyers line up to buy Rio Tinto coal mines-sources

* Sales process to start soon-source

* Private equity, miners seen bidding

* Coal demand comes from Asian steel mills (Adds Wesfarmers, Mt Gibson quotes, details)

By James Regan

SYDNEY, May 5 (Reuters) - The sale of two Rio Tinto RIO.AX RIO.L coking coal mines in Australia is attracting scores of interested buyers as private equity and public companies compete for a foothold in one of the year's hottest commodities, four sources familiar with the matter said on Friday.

Rio Tinto is expected to soon begin an official sales process for the Hail Creek and Kestrel mines in coal-rich Queensland state, which is bringing "an unprecedented number of people to the table," said one source, whose company is interested in the assets.

Analysts expect each of the mines to sell for more than $2 billion and complete Rio Tinto's exit from Australian coal mining after it agreed in January to sell its Coal & Allied thermal coal division to China's Yancoal Australia YAL.AX for $2.45 billion. a lot of interest in a limited number of opportunities in Australian coking coal and that's driving the frenzy for Hail Creek and Kestrel," the source said, speaking on condition of anonymity.

Rio Tinto has not formally announced the sale, but has said it is exiting coal as its focuses on growth in iron ore, copper and its aluminium division. The company declined to comment on whether it was taking offers on the two Australian mines.

3rd party Ad. Not an offer or recommendation by Investing.com. See disclosure here or remove ads .

Australian coking coal is sold mostly to steel mills in Asia. Prices SCAFc1 jumped to half-decade highs late last year on pinched supplies in China and surged again last month after an Australian cyclone disrupted shipments, underscoring the strong demand for high quality coal.

A private equity executive, who has previously bought Australian coal assets, said he expected to face "stiff competition" from other private equity groups for the Rio Tinto mines.

Credit Suisse (SIX:CSGN) is advising Rio Tinto, a third source said. Credit Suisse declined to comment.

Buyers are also looking at mines put up for sale by other companies, including conglomerate Wesfarmers WES.AX , and Peabody Energy BTU.N . Anglo American AAL.L also said a year-and-a-half ago it would exit coal mining as part of a restructuring to pay off debt, but has yet to announce a formal sale since coal prices staged a recovery.

Barry Tudor, a fomer mining chief executive and head of private equity group Pembroke Resources, said the recovery in prices had removed the urgency of a sale for some companies, with mine owners happy to run their operations for cash.

Pembroke last year ago paid A$104 million for three mine tenements from Peabody and was looking for more mines to feed long-term demand from Asia.

"We now have a mandate to specifically find more coking coal assets in Australia," said Tudor, although he declined to comment on whether Pembroke would look at the two Rio mines.

CULLING OFFERS

Until Rio Tinto turned seller, the biggest deal pending was Wesfarmers' sale of its Curragh mine and its 40 percent interest in the Bengalla mine.

3rd party Ad. Not an offer or recommendation by Investing.com. See disclosure here or remove ads .

Wesfarmers Chief Executive Richard Goyder said last week his company has been culling approaches.

"We are working through a reduced number of parties on both assets, details of what's on the table," Goyder said. "The process isn't simple and it will not be short, if indeed anything comes of it."

Offers could also come from mining companies seeking to beef up their coal portfolios or diversify into the sector.

Jim Beyer, managing director of iron ore miner Mt Gibson Iron Ltd MGX.AX said this week coking coal mines in Australia would fit his company's diversification plans into other commodities.

"Coking coal is a business we have been looking at," Beyer said. "There are quality assets out there, but they are very competitive and limited," he said, adding that Mt Gibson was also looking at base metals and other commodities.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.