Aussie Coal Miner Seeks $261 Million Cornerstone InvestmentApril...

Aussie Coal Miner Seeks $261 Million Cornerstone Investment
April 16, 2012, 9:48 AM
By David Winning

Mining magnate Nathan Tinkler’s focus may be Aston Resources’s proposed marriage with Whitehaven Coal, but another of his coal investments has set off on a big fund-raising drive.

Australian Energy Co., known as AEC, is sounding out Asian buyers about a 250 million Australian dollars (US$261 million) investment in a proposed thermal coal-export project in Victoria’s Latrobe Valley, which aims to be operational as soon as the third quarter of next year.

AEC is seeking the investment in exchange for an equity interest of around 40% in the project in Victoria’s Latrobe Valley, according to an information memorandum sent to prospective investors last month seen by Deal Journal Australia.

Closely held AEC, which counts Mr. Tinkler’s Aston Resources Investments vehicle as its fourth-largest shareholder with a near 7% stake, hopes to bring a cornerstone investor on board ahead of an initial public offering on the Australian Securities Exchange later this year.

The key attraction to investors is AEC has rights to take coal from an existing mine feeding the Loy Yang Power Station. That means the company could save an estimated A$400 million in capital expenditure to build a new mine, as well as sidestep the time-consuming process of securing regulatory approvals.

The Loy Yang mine currently produces around 31 million tons of lignite a year, but has spare capacity to increase this by a third, AEC Chairman Allan Blood told Deal Journal Australia.

However, exports are partly conditional on construction of a beneficiation plant at an estimated cost of A$500 million. The facility will upgrade the coal from a calorific value of around 2,000 kilocalories per kilogram to over 6,500 kcal/kg suitable for shipping as briquettes by taking the moisture out.

AEC must also overcome infrastructure bottlenecks, which will limit coal production to an initial 2 million tons as volumes will have to be moved by road. The company plans to ramp up to 7 million tons in a first phase of development, and 15 million tons at a later date.

Rapid consolidation in Australia’s mining sector over the past 18 months is restricting the ability of major coal buyers in China, Japan and South Korea to acquire producing mines without paying over the odds. Exceptions include Sumitomo’s proposed A$430 million acquisition of the Isaac Plains coal mine in Queensland state from Aquila Resources this month, while Peabody Energy has hired UBS to find a buyer for its Wilkie Creek mine.

Infrastructure bottlenecks, especially at ports in Queensland and neighboring New South Wales state, are also crimping interest in the near term.

As a result, much of the action involving Asian buyers is taking place among junior companies with promising projects but lacking enough cash to see them through to production. Interest is also being shown in projects in relatively untapped coal basins outside of New South Wales and Queensland with the potential to ship through under-utilized ports.

As there is no traditional bulk-loading coal terminal in Victoria, AEC is looking to transport coal produced in the first phase of development by road to Port Anthony in Gippsland where it will be put on barges and then transferred to a bulk carrier via cranes or a conveyor.

On a free-on-board basis, the total cost to export the upgraded coal is estimated by AEC at A$65.15/ton, according to the information memorandum.

The Loy Yang mine has reserves exceeding 3 billion tons and a plan to stay in production for 60 years. AEC says it has agreed a joint venture for two adjacent deposits containing more than 10 billion tons of low-ash lignite.

Mr. Tinkler was a director of AEC until Dec. 2008 when he resigned. Tom Todd, a former chief financial officer of ASX-listed Aston Resources, has also served as a director of the company.

Whitehaven Coal and Aston Resources held separate meetings Monday for shareholders to vote on their proposed combination to create a company with a market value in excess of A$5 billion.

http://blogs.wsj.com/dealjournalaustralia/2012/04/16/aussie-coal-miner-seeks-261-million-cornerstone-investor/

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Wow, this is a massive vote of confidence for the 2.5-3bt BM project which has existing rail and port access. Mantle showing it is at the right place at right time. The age of coal dewatering techs is apon us, where coal can be upgraded for less cost than traditional black coal mining. It wont be long until the market catches on, the big players like Tinkler and Gomez are already staking their claim in this future boom.