Coal India seeks to buy Rio Tinto's mines
Thursday, Apr 4, 2013, 4:00 IST | Place: Kolkata | Agency: DNA
Sumit Moitra

State-owned Coal India Ltd (CIL), the world's largest coal miner, is eyeing Anglo-Australian mining giant Rio Tinto's coal mines, particularly those in Australia, sources in the know told DNA.

Battered by falling global coal prices, rising input costs and strengthening of the Aussie dollar, Rio Tinto has put on the block some of its coal assets like Coal and Allied Industries in Australia’s New South Wales province and other mines in Queensland.



“We have received three offers for some Australian coal mines from merchant bankers, including those representing Rio Tinto. Our foreign acquisition committee is considering those offers,” a Coal India official said.

Coal and Allied Industries, managed by Rio Tinto Coal Australia, operates three open cast mines at Bengalla, Hunter Valley Operations and Mount Thorley Warkworth.

Rio Tinto Australia directly controls mines like Clermont, Hail Creek and Kestrel in Queensland. Rio Tinto has reportedly hired Deutsche Bank to find buyers for stakes in these mines as it is unable to operate them economically.

“We are undertaking a review of the optimal growth profile for all business units in light of market conditions for coal and uranium, the high-cost operating environment in Queensland and New South Wales, and infrastructure constraints in Mozambique,” said Rio Tinto in its recently released annual review of operations for 2012.

Apart from Australia, Rio Tinto’s Mozambique coal operations are also under severe stress. In the December quarter, it had written off close to 75% of the value of acquisition made in 2011, indicating it might sell off this asset as well.

All this must be music to Coal India’s ears, observers said. The state-backed miner has not been successful in acquiring overseas coal mines since the purchase of two coal blocks in Tete Province of Mozambique in 2009.

With cash reserves in excess of `60,000 crore, Coal India can afford to clinch big-ticket deals for coal assets across the globe. But factors like steep valuation of mining assets had been a stumbling block as any aggressive deals could bring the public sector company under the scrutiny of institutions like the Vigilance Commission and the Comptroller and Auditor General.

However, now that coal prices have tumbled, it is likely that any global deal might happen at a reasonable price