SYDNEY (Dow Jones)--Linc Energy Ltd. (LNC.AU) Chief Executive Peter Bond said Wednesday that India's Adani Enterprises Ltd. (512599.BY) is interested in buying one of the company's Queensland coal properties, which Linc has recently valued at over A$1 billion.
"I can tell you we are talking to Adani and we are deep in negotiations with them," Bond told Dow Jones Newswires.
"We are taking to a few other groups on that asset, of which Adani are one of the leading groups," he added.
Bond's comments confirm an Indian media report early Wednesday that suggested Linc is poised to sell Adani a coal property for about US$1 billion.
Linc shares soared 31% to A$1.38 on Wednesday, giving the Brisbane-based company a market value of about A$675 million, as the report sparked fresh hope that Linc will finally sell its non-core assets after two previous deals with Chinese companies collapsed at the last hurdle. Bond's confirmation that Linc is talking to Adani came after the market closed.
Resurgent interest in the assets isn't entirely surprising, given sustained Asian demand for coal, which triggered last year's Chinese takeover of Felix Resources Ltd. and this month's offer by Thai miner Banpu PCL (BANPU.TH) for Centennial Coal Co. (CEY.AU).
According to data from Dealogic, Australian coal assets have attracted takeover offers worth US$6.6 billion in the January-June period. That's higher than the total value of transactions completed in any of the previous four years.
As one of the world's fastest growing economies, India currently has to import coal because it doesn't produce enough to meet increasing demand.
The need to source more foreign coal is urgent and a failure to do so could impact the country's economic growth, Coal India Chairman Partha S Bhattacharya told journalists during a visit to Australia last September.
India aims to increase annual additions to power generation capacity fourfold over the next few years to 13,000 megawatts each year from around 3,500 MW a year recently, to provide electricity to millions of rural households and eliminate frequent blackouts.
Citing two "independent" sources close to the deal, India's The Economic Times said Adani is expected to make an initial upfront payment to Linc of US$435 million in the next few days, with the rest of the US$1 billion to come over the next few months.
Linc said last month that it had received a number of "written indicative" offers for all three coal properties: Emerald, Galilee and Pentland.
Bond didn't provide more details on the progress of the discussions, although he did confirm that Adani is interested in the Galilee block.
Negotiations with other parties are continuing over the other two blocks, he said.
Last November, Linc said the Galilee block could contain 7.8 billion metric tons of thermal coal. Emerald contains a mix of thermal and semi-soft coking coal and the smallest asset, Pentland, contains thermal coal.
"Linc Energy confirms that at this stage it has not concluded any binding contract or finalized any material terms with any party," the company said in a statement Wednesday.
Any news on the sales has been met with a healthy degree of investor skepticism, given Linc's failed attempt to sell the Emerald tenement to China's Xinwen Mining Group for A$1.5 billion and all three properties to Yanzhou Coal Mining Co. (1171.HK).
Linc wants to sell the assets so it can focus on its coal-to-liquids fuel business, which it recently moved to South Australia state. It still has a demonstration plant operating at Chinchilla in Queensland state.
-By Ross Kelly, Dow Jones Newswires; 61-2-8272-4692; [email protected]
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(END) Dow Jones Newswires
July 14, 2010 03:27 ET (07:27 GMT)
LNC Price at posting:
$1.38 Sentiment: Buy Disclosure: Held
