A month after Lanco Infratech made a Rs 3,375-crore acquisition of Griffen Coal Mining in Australia, the race to acquire coal assets Down Under is getting intense. At least three Indian companies — Essar Group, GVK and Lanco Infratech — are set to bid to acquire two flagship mines of Hancock Coal, an Australian energy and resources company, said two independent sources aware of the ongoing negotiations.
The two mines – Alpha Coal Project and Kevin’s Corner – are located in the Galilee Basin, adjacent to the mine that Adani Enterprises acquired last year from Linc Energy.
The Alpha Coal Project is an open cut coal mine of the Galilee, a key coal basin in Australia that can produce up to 30 million tonnes of coal per year for over 30 years. Along with Kevin’s Corner, which is an adjoining complex, the two mines are expected to have a combined resource of 7.9 billion tonnes of thermal coal. Of that, Alpha alone has 3.6 billion tonnes of measured, indicated and inferred compliant resources that have been vetted by the Joint Ore Resources Committee (JORC).
Unlike Alpha, Kevin’s Corner is a new project and is being developed . Mine development construction work is slated to begin in 2011, with first production expected in 2013.
Sources say the Indian companies will face competition from global bidders, including some Chinese mining companies. Preliminary bids have been submitted and are expected to exceed the $2 billion mark.
The Indian companies have qualified for the next stage, nvolving binding financial bids. It is still not clear if Hancock will settle for such a high financial offer upfront or if the bidders will actually prefer a staggered payout with a royalty component thrown in.
A source said the China National Coal Group Corporation, the state mining company, also looked at this asset but has opted out. This, however, could not be independently verified.
When contacted, an Essar group spokesperson told Business Standard that “as a policy, they will not comment on market speculation”. Sources in Essar Energy, however, added that even though the target company did approach them with an offer, they may not finally join a bidding war.
GVK’s CFO Isaac George also refused to comment when Business Standard approached him. Lanco spokesperson also refused to comment.
The total cost of acquisition and the subsequent development of the mines will be a capital- intensive venture. Like Adani’s asset in the same basin, these mines, too, will need a multi-user railroad and a port terminal with a coal handling facility and stockyard site, berthing and ship loader at Abbott Point, is the preferred loading site. Some analysts peg the total capex at a mind boggling $10 billion, but there are possibilities that mining companies with assets in the region will all pool in for combined infrastructure-related investments.
Australia has recently become a hot favourite for coal mine seekers. Recently, two Indian companies — Adani Enterprises and Lanco Infratech — have sealed high profile coal mine acquisitions in the country. Adani paid a whopping $2.7 billion (Rs 12,300 crore) in cash and royalty to acquire Linc Energy, which has 7.8 billion tonnes in reserves.
Lanco Infratech acquired Griffin coal mine in Collie, Australia for A$ 750 million (Rs 3,375 crore). The mine has reserves to the tune of 1.1 billion tonnes and currently produces over 4 mtpa of coal and can be ramped up to over 15 mpta in the near term, post-development of evacuation infrastructure. The company said it would be spending around A$900 million (Rs 4,050 crore) as capex towards mine and infrastructure development.
