indian coal companies jostle for position

September 21, 2009

Indian Coal Companies Jostle For Position As The Pace Of International Corporate Deals Looks Set To Accelerate.

By Sally White & Alastair Ford / www.minesite.com

India has been waking up its coal shortages lately. Last week there was a rush of activity both in the physical coal markets and in terms of equity deals. Along with many Indian companies, cement maker Gujarat Ambuja is seeking coal from South Africa and elsewhere this year. India’s largest power generator, NTPC, is said to be exploring opportunities for the acquisition of coal mines in South Africa, Indonesia, Mozambique and Australia, and has appointed Australian broker Macquarie to help.

In Australia, Rio Tinto and Hancock Prospecting are among companies said to be thinking of selling to state-owned giant Coal India stakes in their thermal coal mines. Meanwhile, Coal India, which is the world’s largest coal miner, has said that its IPO will take place within a year. The government plans to sell its stake. Markets have suggested that this will value the company at around US$1.25 billion.

Meanwhile, the strength of demand in the Asian markets could continue to lift US coal producers with significant overseas leverage, according to Coal Investing News. Those named include Alpha Natural Resources, Peabody Energy, Consol Energy, James River Coal, Patriot Coal and Walter Energy.

Coal India aims to import 50 million tonnes of thermal coal a year from Australia, Indonesia and Mozambique starting in 2016 or2017. This extra supply will cover a forecast increase in demand for power that could already have created a 200 million tonnes a year shortfall by 2012, according to the company’s chairman Partha Bhattacharya.

Coal India has already received 15 expressions of interests from Australia for strategic partnerships. Apart from Australia, the company received 18 approaches from Indonesia, six from South Africa and 13 from the US. “We have received a total of 52 expressions of interest. Of the same, 45 are from the mining companies and appear to be sound. A committee is set-up to shortlist the proposals”, Bhattacharyya said. This week he is visiting the US.

India imports Australian coking coal for its steel mills, but it takes only a fraction of Australia’s 130 million tonnes a year of thermal coal exports. India’s 11th five-year development plan aims to provide all villages and houses below the poverty line with power as well as boosting economic growth to 10 per cent by 2011-12. Bhattacharya said he planned to have a deal with one or more Australian miners within a year, although he would not indicate what funds he had at his disposal.

All of which bodes well for the crop of listed junior coal miners focused on South East Asia and Southern Africa. Caledon, for one, currently mining from the Cook mine in Queensland, is widely believed to be the subject of a potential offer from Indian conglomerate The Essar Group.

To the north, in Indonesia, Churchill Mining has little doubt it will be able to line up funding for its huge coal discoveries on the island of Kalimantan. Off-take has always been part of the game plan for Churchill chief Paul Mazak, and Indian power companies haven’t been shy in the past to venture into Indonesia. Also likely to benefit from such a dynamic is Kalimantan Gold, which has several coal concessions in Indonesia.

Meanwhile, down in Africa, the outlook for coal is on the up too. Coal of Africa has just started shipping from its Mooiplats property in Mpumalanga, and has several other projects that it’s bringing up fast. Atlantic Coal wants to move into this space too – it’s just spent most of the summer trying to come to terms with Strategic Natural Resources, which owns a large property in the Eastern Cape. Consultant Dick Fourie of Wood Mackenzie, recently stated at a coal conference in Sandton, Johannesburg, that South Africa was likely to be exporting 48 million tonnes of coal to India by 2020.

And it’s not only South Africa. Slightly further to the north, CAMEC, itself said to be subject to a bid from ENRC, has lately been looking to spin off its Mozambican coal properties into a newly listed vehicle. What will happen to those plans now that ENRC has stuck its oar in is unclear, but India’s planned ability to take lower calorific coal for its new power stations means that the region’s coal deposits ought to be experiencing plenty of interest for a long while yet.