Rio Tinto has received more than 50 expressions of interest since it flagged early this year it would sell its Queensland coking coal assets as it works towards meeting its $8 billion worth of divestments.
The bank has appointed Credit Suisse to handle the $2bn sale of the Kestrel and Hail Creek mines in Queensland and there is no shortage of interest.
Coking coal prices have soared by as much as 25 per cent over the past few weeks, and shot up after Cyclone Debbie smashed parts of Queensland.
Coking coal supply falls in Queensland have a major effect on the world markets, given the state supplied an estimated 48 per cent of the global seaborne market last year.
The premium coking coal shot as high as $US300 a tonne last month from about $US160/tonne in February. Most analysts, however, believe these high prices are not sustainable.
Even at the February mark, prices are still double compared to June last year. UBS analysts believe coking coal is the most overvalued commodity right now and that its prices will have to start falling back.
Rio’s plans to appoint a bank to sell its Kestrel mine, 40km northeast of Emerald in central Queensland, and its Hail Creek Mine, 120km southwest of Mackay in central Queensland, were first revealed by DataRoom in late March.
A number of other banks pitched for the role including Bank of America Merrill Lynch, which initially was touted in the market as the favourite to secure the mandate due to its close connections with bidders in an earlier Anglo American coalmine sale process.
But Credit Suisse emerged on top and a team of bankers has been working on it over the past six weeks.
A data room is due to be established within a fortnight and brochures are being put together now as part of the pitch to potential buyers. Rio Tinto has put no deadline on the deal and the miner’s chief executive Jean-Sebastien Jacques has said the company never had, and never will, embark on a fire sale.
At least 50 parties have so far approached Rio Tinto to kick the tyres for the Queensland assets.
A number of interested parties are thought to be smaller Australian miners looking to boost their portfolio and also take advantage of the current federal government’s favourable view of coal.
Also expected to line up for a Kestrel and Hail Creek acquisition are the groups that were competing for the Moranbah asset, including private equity firm Apollo, Xcoal, BHP Billiton with its joint venture partner Mitsubishi, Glencore and Coronado Coal.
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