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CIL in talks with US mining firms

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Devjyot Ghoshal Kolkata

With its Rs 15,000-crore listing out of the way, state-run Coal India (CIL) is now lining up strategic investments in overseas coal assets. First in line could be a group of mines in the United States’ Central Appalachia region, currently owned by Massey Energy Company, with a production capacity of around 2.5 million tonnes per annum.

CIL Chairman Partha S Bhattacharyya today confirmed, the world’s largest coal mining company, was in talks with US-based Massey Energy for a possible partnership. “We are looking at a strategic investment in one of their mines,” Bhattacharyya said, without divulging the quantum of investment or the likely offtake from this project as the due diligence process was underway.

 

Officials close to the development, however, told Business Standard that CIL has been offered a clutch of mines which can annually produce 2-2.5 million tonnes. “They have offered a group of mines, but there is an issue over valuation. They are asking for a higher value for the assets than what we have proposed. Discussions are on,” the official added.

Virginia-headquartered Massey Energy Company – which has operations in West Virginia, Kentucky and Virginia – is the fourth-largest coal company in the US, with 2.3 billion tonnes of high quality coal reserves. Last month, Massey Energy, in a press release, stated it was exploring strategic opportunities without mentioning the names of any other firm.

“Our Board of Directors and management team are always focused on opportunities to create shareholder value. However, we do not comment on specific opportunities,” the release had said.

Apart from Massey, CIL is also continuing talks with another US miner — Peabody Energy, which is the largest private sector mining company globally. “We are also looking at mines offered by Peabody,” Bhattacharyya said. It is understood that CIL is exploring a joint venture with Peabody to together exploit assets, where it could also have joint ownership, unlike the offer from Massey Energy that is being examined.

In April, Peabody and CIL had issued a joint press release, stating the two companies “are in a broad range of preliminary discussions to explore long-term coal supplies and other possible cooperative ventures. These are at very early stages and there have been no final agreements or decisions made regarding timing or structure”.

However, it is unclear as to the amount of equity participation that the Indian miner will undertake in these projects, since it has previously only said it is open to such arrangements.

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First Published: Nov 13 2010 | 1:22 AM IST

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