JSW joins $2-bn race for Aussie coal mine

Sajjan Jindal-owned JSW Energy is likely to join the race with Essar group, Hyderabad-based GVK and Lanco Infratech to bid for the coal mines that have been put on the block by Australian coal mining major Hancock Coal.

Hancock Coal is seeking a buyer for two of its coal mines Alpha Coal and Kevin’s Corner, which are located in Galilee Basin in the coal-rich Queensland. The combined reserves of both coal mines can be as high as 7.6 billion tonnes of thermal coal which was used to produce electricity. Life of these mines are almost 30 years.

Sources said JSW’s bid will have to match the six bids which have already been accepted by the Hancock management after a first round of review. Sources said the bids, including that of GVK and Essar, are close to $2 billion each.

If the bid goes through, this would be the second such coal mine acquisition for JSW Energy which has signed an agreement to acquire Toronto-listed CIC Energy. The company has mining cum power complex in Botswana, Africa, for which the company has agreed to pay $418 million (Rs 1,895 crore).

An e-mail message to the company on the development went unanswered. The company’s CEO L K Gupta could not be reached on telephone.

The Alpha Coal project, bigger of the two mines, is an open cut coal mine. Alpha alone has 3.6 billion tonnes of measured, indicated and inferred compliant resources that have been vetted by the Joint Ore Resources Committee.

Kevin’s Corner, which is currently under development, has the capacity to produce 30 million tonnes per annum. However, it is a tough coal block to mine, according to one of the bidders. Construction in this mine was expected to start this year and production was expected to start during the later part of 2013.

Both coal mines require investments in infrastructure facilities as well and that would have to be borne by the acquirer. The mines require a dedicated multi-user rail system, along with the existing rail infrastructure. It would also require port facilities and the preferred location would be Abbot Point with coal handling facility and stockyard site, berthing and shiploader.

Some Chinese companies which were earlier a part of the bid have backed out, leaving Indian companies as major contenders for the assets.

Australia has recently become a preferred destination for many Indian companies. In December last year, Lanco Infratech acquired Griffin Coal mine — located in Collie in Western Australia — for A$750 million (Rs 3,375 crore). The mine has reserves to the tune of 1.1 billion tonnes and currently produces over four mtpa of coal, which can be ramped up to over 15 mpta in the near term, post-development of evacuation infrastructure. The company said it would be spending around A$900 million (Rs 4,050 crore) as capex towards mine and infrastructure development.

In August last year, Adani Enterprises paid a whopping $2.7 billion (Rs 12,300 crore) in cash and royalty to acquire Linc Energy, which has 7.8 billion tonnes in reserves.