galilee basin

Plucked from the Australian:


Bandanna keeps tabs on Galilee action

AS Gina Rinehart's Hancock Prospecting thrashes out a multi-billion-dollar deal with Indian power group GVK Infrastructure to sell it two prospective coalmines in the Galilee Basin, one party keeping a close eye on the proceedings is Bandanna Energy.

The Galilee Basin has been a hotbed of activity recently, with India's Adani Enterprises buying Linc Energy's assets last year and Clive Palmer, who also has a big holding in the area, preparing for a Hong Kong listing.

Bandanna, which has UBS working on a strategic review and potential asset sale/joint venture partner search, is understood to have attracted interest from bidders in China, India -- which has been buying up thermal coal for its power stations -- Japan, Korea and Australia.

However, the deadline for indicative bids has been pushed back to early next month as the company awaits results of pre-feasibility studies for several projects including its South Galilee joint venture with the privately held US coal investor AMCI. The thinking is that the studies, expected to be released within a week, will be positive for valuation.

The price Rinehart gets from GVK is another factor that could influence Bandanna's sale price, especially given the market is ascribing very little value to the Galilee assets at the moment (UBS analysts, for example, value it at a conservative $50m).

The miner, which has five projects in Queensland's Galilee and Bowen basins at advanced stages of evaluation, has been valued at $1.4 billion by Wilson HTM. The broker's discounted cashflow valuation is $1.8bn.

Meanwhile, Rinehart's exclusive negotiating period with GVK is expected to expire mid next month.

The proposed deal involves an upfront payment of $1.3bn, then a further $1bn when mining commences.

Rinehart's is the most advanced project in the area, although the first coal from the Galilee Basin is not scheduled to leave the country until 2014.