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Posts Tagged ‘ICVL’

India in race to snap up coal assets

June 7, 2011 Comments off

“From the mining belts of Queensland, Australia, to East Kalimantan in Indonesia, Indian companies are racing to secure coal assets across the globe. Last year, Indian companies overtook those from China, Korea and Japan as the biggest Asian buyers of overseas coal assets. They were following their US counterparts in trying either to increase their exposure to coal at a time of high commodity prices or lock in fuel supplies for industries such as steelmaking.

Unable to guarantee access to supplies at home because of a mixture of bureaucracy, corruption, logistical and environmental issues, many Indian groups have been aggressively trying to buy assets in Indonesia and Australia. India signed $2.4bn of deals out of a global total of $16bn last year, according to Wood Mackenzie, the consultancy. Meanwhile, Indonesia’s coal association has said it expects India to surpass Japan as the leading buyer of the country’s coal.”

Source: Financial Times, June 6 2011

Observations:

  • According to Ernst & Young’s analysis of M&A in the mining industry over 2010 India has risen to the 7th place worldwide with $5.5bln overall acquisitions in the industry. A large part of India’s acquisitions are aimed at coal mines and transportation infrastructure.
  • Most Indian acquirers of coal assets are private utility-linked companies, which are mainly interested in thermal or energy coal assets.

Implications:

  • The gold-rush mentality of many new players and the resulting high premiums paid for coal assets will help the industry in India consolidate, as the more sophisticated players will soon outperform the players that pay too much for access to resources.
  • The Indian government is trying to mobilize state controlled companies to participate in the bidding for overseas coal assets. The creation of the ICVL consortium and the IPO of Coal India are aimed to create more coordination in government efforts.

©2011 | Wilfred Visser | thebusinessofmining.com

Korean Consortium Leads in Whitehaven Coal Takeover

February 17, 2011 Comments off

“In the latest scramble for Australia’s resources by Asian consumers worried about energy security, a Korean consortium has made an initial offer to buy Whitehaven Coal Ltd., a company valued at 3.5 billion Australian dollars (US$3.5 billion).

The non-binding offer by Korea Resources Corp., known as Kores, and Daewoo International Corp. underscores how volatility in commodity markets is driving consumers to bid more aggressively for high-quality reserves that can be shipped home. Coal prices recently surged to two-year highs after major mines around the world were hit by heavy flooding.

Whitehaven, which produces coking coal used in steelmaking and thermal coal used in power generation from five mines in New South Wales state, put itself up for sale last year in a move to capitalize on this wave of acquisition activity. Updating the market Feb. 7, Sydney-based Whitehaven said short-listed parties have been invited to complete more detailed due diligence and submit binding offers. It didn’t identify potential buyers, but the market expects companies from China, the U.S. and India to be involved.”

Source: Wall Street Journal, February 15 2011

Observations:

  • Whitehaven started an official takeover procedure, in which a list of potential bidders is invited to bid for the company based on information provided by the seller in a data room, last year. Initial offers were due of February 2nd, with binding offers expected over the coming month.
  • Driven by increasing coal prices, various Asian companies have bought Australian coal assets to secure access to raw materials over the past 18 months. China’s Yanzhou Coal Mining, Thailand’s Banpu Energy, and India’s Adani secured deals. China Shenhua (which owns assets near Whitehaven’s mines) and Indian ICVL are named as potential competing bidders for Whitehaven.

Implications:

  • The Korean Consortium will likely not be the only bidder in the takeover process. Typically multiple bidders are led to submit an offer in a takeover procedure in order to maximize the price paid for the company. Potential bidders without operating assets in Australia are not expected to be able to realize high synergies, making the bidder that is prepared to take most risk or that is most optimistic about the value ‘win’ the battle.
  • The buyer of Whitehaven might face regulatory obstacles from Australia’s Foreign Investment Review Board, which forced Yanzhou Coal Mining Co. to list the Australian assets in Australia to keep control over the domestic energy industry.

©2011 | Wilfred Visser | thebusinessofmining.com

Riversdale Directors Back Rio Tinto Offer

January 24, 2011 Comments off

“Rio Tinto PLC’s 3.9 billion Australia dollar ($3.8 billion) takeover of Riversdale Mining Ltd. received a boost Monday when the last holdout on the coking coal miner’s board recommended the deal along with its other directors.

NK Misra, a Tata Steel Ltd. appointee to Riversdale’s board thanks to the Indian company’s 24.2% stake in the miner, backed Rio’s offer signalling that the steel producer may not seek to block Rio’s buyout with its own bid to take control of the miner, according to a statement.”

Source: Wall Street Journal, January 24 2011

Observations:

  • Rio Tinto’s bid was unconditionally approved by the Australian Treasurer last Friday, enabling it to quickly close the deal. To convince the shareholders the opinion of Riversdale’s board was crucial.
  • ICVL is reported to meet with a consortium of Indian coal producers on Thursday to discuss a counterbid. This gives the Indians 3 weeks before the closure of Rio Tinto’s bid to convince the shareholders they can offer a higher price.

Implications:

  • ICVL’s chairman has started the verbal bidding war already, by announcing in an interview that the consortium will offer a higher price than offered by Rio Tinto. However, it is hard to find more synergies with the Indian companies than with Rio Tinto. A high Indian offer for Riversdale would purely be a strategic move in order to gain production market share, which could lead to further opportunities in the future.
  • The role of Tata in the acquisition is not fully clear. The company holds 24% of Riversdale’s shares and says it is not opposed to the acquisition. However, the advice by the board member appointed by Tata is explicitly said not to be Tata’s opinion. Tata could surprise Rio Tinto by siding with the Indian consortium, thus gaining goodwill from the Indian government.

©2011 | Wilfred Visser | thebusinessofmining.com

India Venture to Bid for Coal Block in Mongolia

January 11, 2011 Comments off

“India’s International Coal Ventures Pvt., or ICVL, plans to bid for developing huge coal reserves in Mongolia’s Tavan Tolgoi mining deposit, government officials and industry executives said Thursday. ICVL’s interest in the Mongolian block comes at a time when coal and other resource sectors are seeing a wave of multibillion dollar mergers and acquisitions activity globally, much of it driven by increasing consumption in emerging economic giants China and India.

The Indian company is lining up for a tender offer by the Mongolian government scheduled Jan. 17 to develop part of the Tavan Tolgoi mine in the country’s southeast. The mine contains some of the world’s largest unexploited reserves of coking coal, a key raw material for making steel. Overall, the mine has an estimated coking and thermal coal reserves of 6.4 billion metric tons. ICVL will likely bid for a share in the mine’s western block with reserves of 1 billion tons, a Mines Ministry official told Dow Jones Newswires.”

Source: Wall Street Journal, January 6 2011

Observations:

  • ICVL has been created by the Indian government in order to secure metallurgical coal and thermal coal assets in overseas territories. The objective of the vehicle is to own 500 million tons of reserves by 2020.
  • This blog predicted increased interest for the Tavan Tolgoi deposit last week, after speculations on an Indian counterbid to Rio Tinto’s interest in Riversdale.

Implications:

  • If ICVL invests in Tavan Tolgoi with the objective of exporting the coking coal to India this will pose a logistical challenge. The coal would have to be transported to a Chinese harbour to be shipped to India, while export to the Chinese market would be much more logical. It is likely ICVL will strike a deal with trading partners to balance and fulfill the demand.
  • The strategy of the Mongolian government on commercialisation of the Tavan Tolgoi field is still very much uncertain. A partial IPO was announced in June 2010. Potentially the government will look for an international mining company to control the development together with the Mongolian Mining Corp (MMC), triggering a bidding war.

©2011 | Wilfred Visser | thebusinessofmining.com

India Coal JV May Bid for Riversdale Mining

December 15, 2010 Comments off

“India’s steel ministry asked a joint venture of five state-run companies to consider bidding for Riversdale Mining Ltd., in what could further intensify a battle for the Australian coal miner.

Acquiring Riversdale, which has 13 billion tons in coking and thermal coal reserves in its Benga and Zambeze projects in the southern African country of Mozambique, will help the Indian companies secure coal supplies to power an expanding economy. Riversdale said earlier this month it is in talks with Rio Tinto PLC about a 3.55 billion Australian-dollar ($3.53 billion) takeover, but Rio Tinto has yet to submit a formal offer.”

Source: Wall Street Journal, December 14 2010

Observations:

  • Riversdale, listed on the Australian Stock Exchange, is active in coal mining in South Africa and Mozambique. Earlier this month plans of Rio Tinto to offer a small premium for Riversdale become public, while rumors exist that Vale, Tata and NMDC would be interested in acquiring the assets in Mozambique.
  • The Indian coal mining companies that might get involved in bidding for the assets are Coal India, International Coal Ventures Ltd. (ICVL), NTPC, NMDC, Rashtriya Ispat Nigam and Tata, which owns a strategic stake in Riversdale already.

Implications:

  • A joint bid of state controlled companies from India would be one of the first signs of the Indian government pursuing the same strategy as China in securing access to resources abroad. Like China, India has a strong domestic coals supply which is not able to keep up with growing demand.
  • A number of large resources companies have grown in India; Tata Steel, ArcelorMittal, Reliance & Vedanta being the most well-known. However, most of these companies are not state controlled and have positioned their official headquarters in Europe. With the IPO of Coal India and consolidation of other companies the Indian domestic industry gets ready to become active internationally.

©2010 | Wilfred Visser | thebusinessofmining.com