February 24, 2012, 12:33 PM EDT.UBS Bags Mandate for Coalspur’s Vista Selldown. UBS is an early winner in the race for one of the world’s largest new coal export projects, which will feed Asia’s growing fleet of power plants.
The investment bank has been mandated by ASX-listed Coalspur Mines to find a strategic partner for its Vista coal project in Canada’s Alberta province, two people familiar with the matter said Friday.
Coalspur is keen to raise funds by selling down part of its equity in the 1.23 Canadian dollars (US$1.23 billion) project, which aims to produce 11.2 million tons of thermal coal used to generate power. Interested parties are also being offered rights to take and market coal volumes equivalent to the size of the equity stake in Vista, located by a railway near the coal-mining town of Hinton.
Calgary-based Coalspur, which has a market value of 974 million Australian dollars (US$1.04 billion), is flexible on the deal structure but is aiming to retain majority ownership in Vista ahead of construction of the mine starting in 2013, one of the persons said.
UBS, which is running the sales process for Coalspur out of its New York and Sydney offices, is on a strong run of securing sell-side mandates in the coal sector.
Last month, Deal Journal Australia reported U.S. coal giant Peabody Energy has hired the bank to find a buyer for its Wilkie Creek coal mine in New South Wales state. Wilkie Creek produces more than 2 million tons of thermal coal annually, and has a resource of over 500 million tons.
UBS was also appointed by mining giant Anglo American last year to find a buyer for its Callide coal mine in Queensland state, which produces around 10 million tons of thermal coal a year primarily for the domestic market. The mine attracted interest from South Korea, with LG International and a unit of Korea Electric Power, or Kepco, teaming up with Australian utility CS Energy to consider a bid, two people told Deal Journal Australia late last year.
Coalspur’s shares have risen from A$0.33 at the start of 2009 to A$1.57 currently–underscoring that investors are increasingly interested in companies operating in established coal-producing regions with good access to rail and port facilities.
Sherritt International operates the producing Coal Valley and Obed mines, which are 60 kilometers and 10 kilometers, respectively, from Coalspur’s project. Thermal coal from those mines has been sold to buyers in Japan and Korea since the 1980s, and is increasingly being shipped to China.
Coalspur plans to develop the Vista project in phases–with initial annual output of 5 million tons starting in 2015–before ramping up to full capacity three years later.
Development costs for the first phase are estimated at C$864 million, with the balance C$370 million required to bring the mine up to maximum capacity.
Coal from the Vista project will be railed to the Ridley Terminals at the port of Prince Rupert in western Canada, where Coalspur has secured handling capacity of up to 8.5 million tons annually for up to 21 years.
Coalspur is aiming to secure additional port capacity and turn an initial haulage deal with Canadian National Railway into a definitive agreement over the coming year.
CPL Price at posting:
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