Australia miner says surging coal prices curbing asset sales in sector

Valecha Engineering

27/09/2016 08:54

By James Regan 
    SYDNEY, Sept 27 (Reuters) - Australia-listed miner Terracom 
Ltd  TER.AX  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.  urn:newsml:reuters.com:*:nL3N1AY58G 
    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.AX  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.AX  14 months ago paid Vale 
 VALE5.SA  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.AX  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  APO.N  emerged as the frontrunner for 
Anglo American's  AAL.L  metallurgical coal mines in Australia, 
valued at up to $1.5 billion. 
     
    ($1 = 1.3060 Australian dollars) 
 
 (Reporting by James Regan; Editing by Joseph Radford) 
 ((jim.regan@thomsonreuters.com; +612 9373-1814; Reuters 
Messaging: jim.regan.reuters.com@reuters.net)) 
 
Keywords: COAL AUSTRALIA/TERRACOM