more m&a in the coal space

Japanese firm buys $435m stake in Xstrata's BC coal projects

By: Matthew Hill
13th March 2012

TORONTO (miningweekly.com) – Diversified miner Xstrata has sold a 25% stake in its British Columbia Coal assets to Japan’s JX Nippon Oil & Energy for $435-million, the companies said on Tuesday.

Xstrata, which has been amassing land in the Peace River coal fields, said technical studies of its two most advanced projects in the area indicated yearly production potential of 9.5-million tons of mainly hard coking coal, used to make steel.

The company announced last week it agreed to buy oil and gas firm Talisman Energy's Sukunka deposit in British Columbia for $500-million, adding to acquisitions the company made last year.

In October, Xstrata paid C$40-million for Cline Mining's Lossan metallurgical coal deposit in the Peace River coalfield, following its $147-million purchase of First Coal Corporation, which owned nearby prospects, in August.

Xstrata, the biggest exporter of seaborne thermal coal, said it would start exploring the properties this year.

"There are meaningful synergies between these assets, creating the opportunity to develop a substantial and efficient complex of mining assets, unlocking significant value for our shareholders and other stakeholders in our operations," Xstrata Coal CEO Peter Freyberg said in a statement.

The Swiss-based miner, which trades in London, already had a partnership with JX Nippon at the Oakbridge mines in New South Wales, which produces semi-soft coking coal and thermal coal, burned in power stations.

Xstrata also owns coal mines in South Africa and Colombia.

"This opportunity has great significance for JX as it marks our entry into the hard coking coal market," said JX Nippon president Yasushi Kimura.

Under the joint venture agreement, the Japanese firm will have exclusive marketing rights for production out of the First Coal and Sukunka assets in the South East Asian country.

Activity in the Peace River coalfields has been gathering pace, as Anglo American reversed a decision to sell its assets in the region last year, and Walter Energy in November 2010 agreed to buy Western Coal, which owned three British Columbia mines, for $3.3-billion.

Anglo American said in October it hoped to more than triple production to 3.5-million tons yearly at its Peace River Coal unit by 2015.

Teck Resources, Canada's biggest coal miner, aims to lift output of metallurgical coal to a rate of more than 30-million tons yearly by 2013, as it expands current operations and reopens a shuttered mine in British Columbia.

Commodities trader Glencore, which owns a 34% stake in Xstrata, in February made a bid to merge the two companies. Both firms, which have made names for themselves as dealmakers, have continued to pursue other transactions in the meanwhile.

Glencore, also based in Switzerland, was named at the weekend as having expressed interest buying Canada's biggest grain-handler Viterra.

Edited by: Creamer Media Reporter

http://www.miningweekly.com/article/japanese-firm-buys-435m-stake-in-xstratas-bc-coal-projects-2012-03-13