In the April and June 2014 editions of the Australian Mining Sector Update, we reported on the takeover offer by Baosteel and Aurizon for all of the ordinary shares in Aquila Resources at a price of A$3.40 cash per share. On 16 June 2014, Aquila received a proposal from ASX-listed Mineral Resources contemplating a conditional off-market takeover of Aquila. The consideration for the proposal was to consist entirely of shares in Mineral Resources at a value equivalent to A$3.75 per Aquila share. Discussions took place between Aquila and Mineral Resources in relation to the proposal but then ceased, with the parties unable to agree to mutually satisfactory terms. On 3 July 2014, Mineral Resources announced that it had accepted the Baosteel and Aurizon offer. On 9 July 2014, Baosteel and Aurizon announced that their relevant interest in Aquila shares had increased to approximately 90.05% and that they intend to exercise their rights under the Corporations Act 2001 (Cth) to compulsorily acquire the remaining Aquila shares and convertible securities.
Recently completed deals
Further to our reporting in the November 2013 edition of the Australian Mining Sector Update, ASX-listed Rio Tinto announced on 2 June 2014 that it has completed the sale of its 50.1% interest in the Clermont Joint Venture to GS Coal, a company jointly owned by Glencore and Sumitomo. Under the sale terms, Glencore has assumed management of the Clermont mine, located in Queensland’s Bowen Basin. Rio Tinto has stated in its announcement that it remains committed to a long-term future in the Australian coal industry, noting that a US$2 billion extension of the Kestrel mine was completed in 2013 and that studies are currently taking place into the potential extension of the life of Hail Creek mine. Rio Tinto’s sold its majority interest in the Clermont Joint Venture to GS Coal for US$1.015 billion.
Market rumours and opportunities
According to SBS CNBC, South Korean construction company Dongbu Corporation is reportedly intending to dispose of its 8.33% interest in the Togara North underground coal mine located in Queensland’s Bowen Basin. The Togara North mine is also held by Glencore (with a 70% interest), Korea’s Hyosung and Korea Resources Corporation (each with an 8.33% interest) and Japan’s Mitsui (with a 5% interest). A feasibility study for the project is underway. Dongbu is reportedly expecting to raise about US$59.1 million from the sale of its minority interest.
Mergermarket has reported that ASX-listed coking coal company Tigers Realm Coal is seeking feasible acquisition opportunities in order to grow its global asset portfolio. According to Tigers Realm’s CEO Craig Parry, the company is particularly interested in assets located in Australia and Indonesia and will consider any viable offers made to the company. Reportedly, potential targets may include privately-owned Queensland Coal Corporation who holds the Fairhill and Wilton hard- coking coal projects located in Queensland’s Bowen Basin, as well as ASX-listed Bathurst Resources.
The Australian has reported that Japanese trading houses may potentially seek to divest underperforming or undeveloped Australian coal assets in a bid to meet new return-on-equity targets. Reportedly, coal-related underdeveloped or second tier assets are tipped to be prime sale candidates. In this context, the report noted that Sumitomo and Itochu each hold a 12.5% interest in Glencore’s Wandoan project located in Queensland’s Surat Basin. The report also noted that Sojitz owns the Minerva coal mine located in Queensland’s Bowen Basin, which has six years of life left.
FT.com has reported that ASX-listed BHP Billiton is contemplating disposing the majority of the businesses from the “Billiton arm” of the mining group. Reportedly, BHP Billiton’s CEO Andrew Mackenzie has indicated that the multinational mining, metals and petroleum company is considering structural options in order to reconfigure the company and focus on its long-life mines and large oil and gas assets. Any sales of former Billiton assets from BHP Billiton may reportedly interest privately-held mining investment companies.
NEW OVERLAPPING TENURE REGIME
Further to our reporting in the June 2014 edition of the Australian Mining Sector Update regarding the release of the Mineral and Energy Resources (Common Provisions) Bill 2014 (Qld), we have prepared an article on the new coal and CSG overlapping tenure regime set to be introduced by the Bill.
The existing overlapping tenure regime, which was introduced in 2004, has been widely criticised for being unnecessarily complex and impeding the development of coal and CSG resources in Queensland. In particular, this new regime removes the existing barriers to grant of a resource authority in areas where there is overlap between coal and CSG tenure and establishes a right of way for coal (subject to certain notice and information sharing requirements).
The Bill has been referred to the Agriculture, Resources and Environment Committee. The Committee is due to report back by the end of August.
A copy of the article is available here.
NEW MINE APPROVED IN QUEENSLAND’S BOWEN BASIN
On 2 July 2014, Queensland’s Deputy Premier and Minister for State Development, Infrastructure and Planning, Jeff Seeney, announced that Queensland’s Coordinator General had approved the Byerwen Coal project, subject to 122 conditions. The Byerwen project is located 140 kilometres west of Mackay and has the potential to produce 10 Mtpa of coking and thermal coal for export to primarily Asian markets. The Coordinator General’s report will now progress to the Commonwealth Environment Minister for a decision on issues covered by the Environment Protection and Biodiversity Conservation Act 1999 (Cth) under the assessment bilateral agreement between the State and Federal governments.
COAL BLOCKS IN INDIA UP FOR AUCTION
Further to our reporting in the May 2014 edition of the Australian Mining Sector Update, Project Finance International has reported that India’s Coal Ministry is intending to auction 25 coal blocks which were taken back from private companies that had failed to develop them. Reportedly, the majority of these coal blocks are small mines, but larger mines such as Mahal and Rajbar in Jharkhand are also amongst the blocks set to go under the auction hammer. Parties interested in these blocks reportedly include steel and cement companies, as well as power firms under tariff-based bidding.