Coal India near deal on Australian mines MATT WADE, NEW DELHI...

Coal India near deal on Australian mines MATT WADE, NEW DELHI
April 12, 2010

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COAL India Limited says it is in the advanced stages of negotiations for a $US1 billion ($1.1 billion) deal with Peabody Energy that would give the giant Indian miner a stake in four Australian coalmines, along with other international assets.

Phalguni Guha, chief general manager of Coal India's foreign-venture arm, Coal Videsh, told BusinessDay he expected the deal with Peabody to be finalised in the next ''few months'' but declined to reveal where the Australian mines were located.

The deal could include assets in the United States and Indonesia as well as Australia, Mr Guha said. Mines that produce both thermal coal and metallurgical coal suitable for steel production are involved.

Peabody Energy Australia did not respond to BusinessDay's request for comment.

Mr Guha said Coal India had appointed merchant bankers to assist with finalising the deal structure.

DSP Merrill Lynch is advising Coal India on the Australian aspects of the deal, he said.

State-owned Coal India, which is already the world's biggest coal producer, says it is in the first stages of developing a ''global footprint.''

''About six months back we invited expressions of interest from companies willing to establish linkages with Coal India Limited,'' Mr Guha said. ''Based on that, we got a number of offers and we selected some of them and invited them to come to India to make a presentation on what structure they had in mind and what they wanted to offer Coal India.'' Industry sources say several major international miners responded to Coal India's invitation to form ''strategic partnerships'' including Rio Tinto, Hancock, Anglo Coal Australia and Xstrata.

Mr Guha said the company had ''a lot of money'' and would explore other opportunities in Australia once the Peabody deal was signed. It is also believed to be on the lookout for opportunities in Indonesia, the US and South Africa.

''After we complete this deal we will take stock of the situation and then again start the same process,'' he said. ''There are a lot of possibilities.''

''First we are going for Peabody,'' Mr Guha said.

Coal India's board has reportedly approved a war chest of up to $2 billion, and more could be made available if attractive deals emerge.

It is looking at three alliance models: equity in existing mines, pure offtake deals and joint ventures to develop new mines.

Coal provides more than half of India's energy needs and analysts say it will need to significantly boost coal imports to meet demand.

Source: The Age