elix Resources sizes up Asian coal assets * Font Size: Decrease...

elix Resources sizes up Asian coal assets

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March 07, 2009
Article from: The Australian

FELIX Resources is eyeing energy coal assets in India and Indonesia after last month shelving talks on selling itself to another company.

"Indonesia and India are the two areas we are having a look at," managing director Brian Flannery said.

The Brisbane company, which exports to Korea and Japan, was talking to "large groups" in India that wanted to build new power stations, he said.

Indonesia is the biggest exporter of energy coal.

India is planning to build nine 4000MW power stations to double coal-fired electricity production by 2017, according to Australia's commodity forecaster. Prices for the fuel rose to a record last year because of demand from Asia, boosting Felix's profit threefold to $166 million and taking cash on hand to $340 million last month.

"If you take the bet that there is going to be a rapid increase in energy demand in India, which would be the case, India is your first choice to develop supply, with Indonesia probably a close second," ANZ senior commodity strategist Mark Pervan said.

"This is really a locality strategy," he said.

Felix closed 0.6 per cent higher at $7.05 yesterday, after gaining as much as 8.1 per cent earlier. The stock has dropped 20 per cent this year and has a market value of $1.4 billion. Demand for imported coal in India would rise over the next five years as new power stations were built in coastal areas, Mr Flannery said.

The company would also study merger and acquisition opportunities in Australia in the next six months after recent falls in share prices, he said.

Felix had "decided to move on" after shelving talks on a possible takeover last month, Mr Flannery said.

Talks were continuing, but "given the world financial environment it is unlikely that these discussions will be concluded in the near term", the company said last month.

Indian energy coal imports would more than triple to as much as 100 million tonnes by 2012 as new power plants were built, Coal & Oil Group, India's largest coal importer, said last month.

The nine planned power stations will each consume as much as 15 million tonnes of coal annually, ABARE said this week. There would be "strong growth" in Indian coal demand in the medium term, it said.

The country imported 34 million tonnes of coal last year, ABARE said. Thermal coal contract prices, at a record $125 a tonne for the year ending March 31, could drop to $75 a tonne in the year starting April 1, RBC said.

Bloomberg