Australia-listed miner Terracom Ltd (TER) says the steepest rally in coal prices in over half a decade means that mines digging the commodity are becoming more expensive to buy, curbing a wave of purchases in the sector.
Less than a year after the coal industry was declared to be in terminal decline as governments tackle carbon dioxide emissions, coal markets have surged on factors such as China tightening regulations on local production.
That has pushed up prices for coal assets, which companies such as Terracom had been snapping up in countries like Australia, Indonesia and Mongolia.
"There would have been more (industry wide) M&A activity if the price had stayed low a bit longer," Terracom Chairman Cameron McRae told Reuters in an interview.
"Prices are going up and this is making it harder on buyers," said McRae, who cut his teeth digging mines for Rio Tinto (RIO) over nearly three decades.
Coal mines were among the first businesses to go on the block after the global mining boom went bust.
Terracom in July agreed to pay just A$1 ($0.76) for an old Rio Tinto thermal coal mine in Australia called Blair Athol, now undergoing reactivation. The mine has been closed since 2012.
Rival Stanmore Coal (SMR) 14 months ago paid Vale
and Sumitomo Corp <8053.T> A$1 for ownership of the Isaac Plains coking coal mine in the state of Queensland. The mine reopened in May. Prices for metallurgical coal, which Terracom plans to produce in Mongolia and Indonesia, have more than doubled since January, with traders on Tuesday quoting spot prices of around $206 a tonne.
The last time coal prices breached $200 a tonne was 2012, when flooding cut off a third of the world's supply from Australia. In January, the spot price stood at just $75 per tonne.
In September last year, New Hope Corp (NHC) agreed to pay Rio $606 million for its 40 percent stake in a thermal mine in Australia.
More recently, a consortium led by private equity firm Apollo Global Management
emerged as the frontrunner for Anglo American's metallurgical coal mines in Australia, valued at up to $1.5 billion. ($1 = 1.3060 Australian dollars)
