Coking Coal News: Aquila Project Could Produce 1.5m tpy

Australian coal miner Aquila Resources hopes to produce hard coking coal in 2013 from its Washpool project in Queensland’s Bowen Basin.

A feasibility study for the mine has just been completed and the miner is hoping production costs will be an at port price of around A$106 a tonne, although this price excludes royalty payments.

“The feasibility study confirms the status of the Washpool hard coking coal project area as a major coking coal resource and provides confirmation that this resource is economically recoverable with opencut mining methods,” said Aquila executive chairman Tony Poli.

Aquila said it would require A$320m of capital investment in the project with construction commencing in 2012. Washpool would be able to produce 1.6m tonnes of high-quality hard coking coal for a period of 25 years. Expected future cash flows from the mine over its expected life span would be $364m a tonne with an internal rate of return of 30 per cent.

Coal from the project will be exported via the Wiggins Island coal terminal at the port of Gladstone, Queensland.

The Washpool product would be hard coking coal with very strong coking coal properties and a higher-than-specification ash content.

Queensland Miners To Bid For Rail Network

Bid Worth Over $A4 billion

A group of 13 Australian coal miners have made a joint A$4.85 billion bid for the Queensland rail-track network in a bid to prevent the system being sold on to the stock market as part of the state’s privatisation programme.


The group, the Queensland Coal Industry Rail Group (QCIRG), is headed by BHP Billiton, Rio Tinto and Xstrata and says its bid was conditional on the state government dropping its plan to sell both the track network and the coal haulage business in an initial public offer.

The miners are concerned that if both the tracks and trains are sold together the new private owner would exert too much power over the coal industry.

Most of Australia's coal ports are dogged by infrastructure constraints and suffer from endemic congestion, with the bottlenecks resulting in lengthy queues of ships waiting for berths.

QCIRG is chaired by former New South Wales state premier Nick Greiner, who said the offer represents a substantial premium to what is likely to be achieved under the government's proposed listing plan.

"We have considered the alternative model under the IPO ... and strongly believe it does not represent an optimal or even reasonable basis for assuring the future of the state's major export industry," Greiner said in a statement.

"Importantly, our offer is able to be settled with the government prior to the IPO and will not be dependent on volatile equity markets, removing major risk for the state while also providing early settlement."

Macarthur Rejects Reduced Peabody Offer

Shares Plunge As Miner Rejects Bid

Macarthur Coal Ltd., the world’s largest pulverized coal producer, has rejected the latest bid from Peabody Energy Corp.’s saying it is too low. Macarthur’s two biggest shareholders, Citic and ArcelorMittal are also expected to reject the bid.

Peabody reduced its offer from A$16 a share to A$15 a share, citing its due diligence review of Macarthur’s finances and the Australian government’s plan to bring in a ‘super tax’ on mining companies’ profits.

Shares in Macarthur fell over 20 per cent on the news to close at A$11.25 a share.

Macarthur Cool On Peabody Offer

"Not Inclined To Take A Discount" - Chairman

The Chairman of Australian coal miner Macarthur Coal has said that Peabody Energy’s lowered takeover will be hard to recommend.

Keith Lacy is quoted in the Australian Financial Review as saying that while acknowledging the Australian government’s proposed 40 per cent tax on mining companies’ profits makes it harder of Peabody to pay top dollar, he added "we're not inclined to take a discount for a tax that may never be introduced."

The “super tax” is expected to be introduced from July 2012.

Peabody lowered its cash offer yesterday by one dollar to A$15 per share citing the proposed tax and following its due diligence exercise.

Shares in Macarthur Coal closed down1.9 percent to A$13.12 on the Australian stock exchange, their lowest level since 30 March and 13 percent below Peabody’s reduced cash offer.

Peabody Cuts Macarthur Bid

New Tax Said To Be Behind Bid Cut

United States coal miner Peabody has cut its offer for Australia’s Macarthur in a move which seems to have been triggered by the Australian government’s plan for a 40 per cent tax on mining companies’ profits.

Peabody has dropped its bid for Macarthur Coal Limited from A$4.07 billion (US$3.67 billion) to A$3.82 billion after completing its due diligence and after the announcement by the government on the 40 per cent ‘super tax’ at the start of last week.

"The definitive proposal delivers a clear, compelling and significant premium for Macarthur shareholders, and follows Peabody's due diligence as well as the introduction of the Australian resources profit tax proposal," it said.

The revised offer is for A$15.00 per share. Peabody's first bid was for A$13 per share and was followed by further offers of A$14 and A$16 per share. Macarthur’s shares – which had been trading higher than the current offer in the middle of April – closed at A$13.38 in Sydney on Monday.

Macarthur's board has rejected two Peabody bids as well as a bid from Australia's New Hope in favour of its own takeover of Gloucester Coal. However, that was rejected last month by Noble Group, a key Gloucester shareholder in a move which would have given Noble a 24 per cent stake in Macarthur and which would most likely have thwarted the Peabody bid. Noble says it is no longer interested in that transaction.

In response to the new offer, Macarthur continued to advise shareholders to take no action until its directors had reviewed the offer. It is believed that the Macarthur board is set to meet in the next couple of days.

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Xstrata To Get More For Its Australian Coal

Prices up by up to 114 per cent

Coal miner Xstrata says it has settled most of its annual Asian thermal coal contracts in at a price level some 38 per cent higher than it achieved last year.

Quarterly semi-soft coking coal prices have risen 114 per cent and the company says its production of coking coal in Australia has risen 83 per cent.

Macarthur Coal Says Profits May Fall

Macarthur Income May Be 39 Per Cent Down

Australian coal miner Macarthur Coal Ltd has said that full-year profits may fall as much as 39 percent from a year ago after a fall in prices.

Net income may be A$103 million to A$113 million for the year ending 30 June from A$168.6 million in 2009, the company said in a statement to the Australian stock exchange.

Macarthur is currently the target of a A$4.1 billion ($3.8 billion) takeover offer from America’s Peabody Energy.

“Profitability in the June 2010 quarter has improved given recent coal price settlements with higher prices starting April 1”, the company said in the statement. Macarthur said it is still on course for full-year sales volumes of 4.8 million to 5.0 million tons.

Coking coal prices have risen sharply in recent months after the global steel industry came into recovery. A number of global coking coal suppliers including BHP Billiton, Rio Tinto and Teck Resources won a shift from annual to quarterly contracts and a rise of 55 per cent for supplies in the April to June quarter. Australia’s Centenntial Coal also warned of a tightening in the global supply of the product.

Peabody asked Macarthur, the world’s largest exporter of pulverized coal, for more information after completing a review of its finances yesterday. The American miner is also said to be concerned after the Australian government announced on Sunday that it plans to bring in a new 40 per cent tax on mining company’s profits. Macarthur said on Tuesday that the new tax had a brought an air of uncertainty to the industry.

Centennial Warns Of Higher Met Coal Prices

Global Supply "Fragile"

Australian coal exporter, Centennial Coal, has said that fragile supply conditions in the global metallurgical coal market mean that it expects the contract price to "significantly increase" from the $US200 per tonne in the Japanese fiscal first quarter.

In March Japanese steel mills agreed to pay BHP Billiton, Rio Tinto Group and Teck Resources around $200 a tonne for a three month contract beginning 1 April 2010. That’s a 55 per cent increase over the 2009/10price. Previous contracts have run for one year’s duration.


In a presentation to a coal industry conference, Tony Macko, Centennial’s general manager of corporate affairs said he expects a recovery in demand for metallurgical coal to drive the contract price increase for the Japanese fiscal second quarter commencing 1 July 2010. This is on the back of an increase in global steel demand.


Centennial said that China is expected to remain a net importer of thermal coal, used to fuel electrical power stations to remain tight after bad weather caused cuts in production in Queensland and Indonesia and impacted on export shipping times.

Centennial said there are more than 60 export vessels queued at the Dalrymple Bay and Hay Point coal terminals in central Queensland.

Australian To Introduce New Tax On Miners

Mining Companies To Pay Extra 40 Per Cent Tax

The Australian government is proposing a new 40 per cent tax on the profits of resource companies.

Shares in mining companies fell after Prime Minister Kevin Rudd announced on Sunday that the tax would be introduced in 2012, raising $A9 billion a year in government revenue. The income would be used to finance economic reforms and would shore up state retirement pensions. In return corporation tax would be cut from 30 per cent 28 per cent.

Profits in mining companies have boomed in recent years on the back of increased demand from China and India.

Shares in mining companies fell sharply on the Australian Stock Exchange. BHP Billiton fell 3 per cent while Rio Tinto shares fell 4.3 per cent. Analysts suggested that the new tax could scupper plans by the two companies to controversially merge their iron ore operations in the Pilbara region of Western Australia.

BHP Billiton said the measure would raise the total effective tax rate on the company's profits from 43 percent to 57 percent.

"These proposals seriously threaten Australia's competitiveness, jeopardize future investments and will adversely impact on the future wealth and standard of living of all Australians," BHP Billiton chief executive Marius Kloppers said in a statement.

BHP Billiton’s profits were $6.14 billion for the six months ending 31 December 2009, more than double that of a year earlier.

Rio Tinto's Australian managing director David Peever said the new tax would make the Australian mining industry the highest taxed in the world and less competitive.

Rio Tinto’s profits were $4.9 billion for 2009, up 33 percent over the previous year.

Mr Peever said Australia had been kept out of recession by the strength of its mining sector.

"But the same industry is now being portrayed by the government as not paying its way," he said in a statement.

The opposition Liberal Party said the move could kill Australia’s mining boom.

Noble May Make Fresh Approach To Macarthur

New Offer May Come This Week

The Australian Financial Review’s Street Talk column reported in its Wednesday edition that Noble Group Ltd may be preparing to make a new approach to Macarthur Coal as early as this week.

Last week Noble saw a deal rejected by its shareholders in which it would have become the largest shareholder in Macarthur.

Macarthur is currently in talks with US miner Peabody Energy Corp., which has made a A$4.1 billion cash offer for the company.

White Energy To Buy South Australian Coal Ltd

Deal Gives Access to 500mn Tonne Resource

New South Wales’ White Energy is to buy South Australian Coal Limited in a $A39.3 million all-share deal.

The deal will give White Energy access to SA’s 500 million-tonne coal resource at Lake Phillipson, about 60 kilometres south of Coober Pedy in the far north of the state.

White Energy MD, John Atkinson, says shareholders in SACL are reinvesting $100 million back into White Energy, which it will add to its overall funds.

"The key figures in the South Australian coal company are putting their money where their mouths are and that'll give White Energy in excess of $200 million and we'll then use funds to exploit the opportunity at Lake Phillipson and also exploit the opportunities in other coal markets," he said.

Lake Phillipson coal will also be benefit from processing by White Energy to enable it to be exported.

"That process takes high-moisture coal and effectively reduces the moisture content and creates a high-energy and high-value thermal coal out of what started as a high-moisture low-energy coal," he said.

SACL was spun-off from Felix Resources when Felix was taken over last year by Chinese state-owned Yanzhou Coal Mining last year.

Under the bid, SACL shareholders are being offered 0.07985 WEC shares for each share held. They could also receive an additional 21.61 cents per share if additional coal resources are defined in SACL's existing tenements.

Alternatively, SACL shareholders can receive 19.96 cents per share in cash, up to a maximum aggregate of all shareholders of $10 million.

SACL's independent directors have unanimously recommended the deal, in the absence of a superior proposal.

Noble Shareholders Reject Gloucester Coal Sale

Trader Also Does Not Agree With Peabody Offer

Singapore commodity trader Noble Group said on Monday that its shareholders have rejected a resolution proposing the sale of the firm's stake in Gloucester Coal to Macarthur Coal. The company said the proposed conditions give different options to large and small shareholders.

The resolution, rejected by shareholders voting at a meeting in Hong Kong, would have given the firm a 24 per cent stake in Australia's Macarthur, the subject of rival bids as firms compete for its cleaner coal.

Noble also said in a statement it did not agree with US coal company Peabody Energy's proposed $16 per share takeover of Macarthur.

"Having come up the hard way, and in the not too distant past being pretty small ourselves, we are very opposed to the spirit of the Peabody transaction," the company said in a statement.

New Hopes Weighs Up Alternatives To Macarthur

Company Will "Look Somewhere Else" If Bid Fails

Australia’s New Hope Corporation, which last week had a revised takeover bid for Macarthur Coal turned down, has said that it will look for other acquisitions if, as seems likely, its bid for Macarthur is unsuccessful.

Speaking to Australia’s ABC TV network on Sunday, New Hope Chairman Rob Millner said “Obviously there are other avenues for us. If we can’t find anything in coal, we’ll have to go and look somewhere else. Going forward, there’s a real shortage of particularly pulverized coal in the world, and most of the ports around the world are constrained by capacity, so I see a good future for coal, both thermal and PCI coal.”

Commenting on the Macarthur bid, Mr Millner said: “If we secured Macarthur that would probably steady us up for the time being (with acquisitions). But, you know, it's certainly going to create a very large independent coal company with a market capitalisation of well over $8 billion and it would be in the top 30 to 40 companies within Australia."

Meanwhile, Andrew Harrington, a coal analyst at Paterson Securities, told ABC “They [New Hope] don’t have any debt on their balance sheet. They’ve got A$1.5 billion in cash in the bank and probably another half billion coming from the sale of their Arrow Energy shares, so they could easily plonk down the cash and raise some financing to afford this.”

New Hope’s revised takeover bid for Macarthur - its second bid - included A$950 million in cash, but it was rejected by the Macarthur board on 15 April. Macarthur said the New Hope bid did not represent an adequate premium for control of the company. Macarthur said on Friday that it intends to enter into talks with US miner Peabody Energy, which raised its bid to A$16 a share, valuing Macarthur at A$4.1 billion.

Macarthur To Talk To Peabody

Large Shareholders may keep stakes in company

The board of Macarthur Coal has said that it will open talks with Peabody, following the American company’s latest $16-a-share offer that values Macarthur at $4.07 billion.

Peabody will be granted a five day period of due diligence.

However Macarthur said an extraordinary general meeting scheduled for Monday to approve its takeover of Gloucester Coal has been postponed to a date, time and venue to be advised.

The moves came after two of Macarthur’s largest shareholders, Korean steel mill Posco with an 8.3 per cent stake and international steel company, ArcelorMittal, which has a 16.6 per cent shareholding in Macarthur, gave a guarded welcome to Peabody’s latest offer.

POSCO said that it "confirms its in-principle support for a Peabody-led privatisation of Macarthur" while ArcelorMittal stated "that the Peabody offer is one that warrants due consideration". Macarthur’s largest shareholder, China’s Citic, has yet to indicate its support for the offer. Peabody has indicated that Macarthur’s three largest shareholders may be allowed to keep their stakes in the company.

The deal to buy Gloucester Coal and a stake in Hong Kong-based Noble Group’s Middlemount project in Queensland would have given Noble at 24 per cent stake in Macarthur. Industry-watchers are suggesting that this deal is now dead as Macarthur begins its engagement with Peabody. However, Macarthur is yet to officially recommend Peabody’s latest bid which could leave the way open for a bid from another mining giant, Switzerland’s Xstrata.

Macarthur Postpones Shareholder Meeting

Gloucester Coal Vote Deferred By A Week

Australian miner Macarthur Coal has announced a one-week delay in a shareholder vote on whether to take over smaller rival Gloucester Coal Ltd.

In a statement on Friday the company said that a shareholder meeting due to take place on Monday will now take place on 19 April.

The company has delayed the vote after some shareholders complained there was not enough time to review all the information the company has disclosed with regards to the matter.

Macarthur is fighting a takeover battle with America’s Peabody Energy. Earlier on Friday Macarthur rejected a counter-bid from Australian coal miner New Hope.

Rio Tinto Abandons Annual Iron Ore Contracts

Negotiations with customers still taking place

Global miner Rio Tinto Ltd has announced that it is to move away from annual iron ore pricing contracts and is now negotiating with its customers to supply on quarterly contracts.

Chief executive of iron ore Sam Walsh said in a statement on Friday that the move "is in line with our recent comments that benchmark pricing only works if it reflects market fundamentals, otherwise the system would need to change."

Mr Walsh said that negotiations were still taking place and no further guidance was possible.

The move brings to an end the 40-year system of annual benchmark contract prices between miners and steelmakers. At the end of March RT’s rivals, BHP Billiton and Vale both said they had come to agreements with Japanese and Korean steelmakers to supply iron ore based on quarterly contracts. At the same time they announced price rises of over 90% more than the 2009-10 contract prices.

The move to quarterly contracts for iron ore comes after a similar move by BHP to move to quarterly contracts for coking coal.

Meanwhile magnetite iron ore pellet producer Grange Resources Ltd said on Friday said that it was finalising a quarterly index-based pricing arrangements with its major shareholder and main customer, China's Jiangsu Shagang Group Co Ltd.

Grange said it had secured an interim price increase of 69 per cent for iron ore pellets and expected that the final average price it received in 2010 would be between 80 per cent and 120 per cent higher than 2009 prices.

Commenting on the arrangement Grange chief executive Russell Clark said "Once we have final agreement, the revenue from pellets sales after 1 April 2010 will be backdated to reflect the new arrangements."

Macarthur Rejects New Hope Bid

Xstrata "Mulling Own Bid" - Report

Australia’s Macarthur Coal has rejected a $3.4 billion bid from rival Australian miner, New Hope.

New Hope has made an all-share offer worth $14.58 a share, a 58c premium over the rival bid from the US’s Peabody Energy.

Macarthur’s shares closed at $15.50 – a rise of 8.2% on the day.

Macarthur has announced that a meeting on Monday to discuss a deal with Hong Kong’s Noble Group will take place as planned on Monday. Peabody has tried to get Australia’s Takeover Panel to stop the meeting from taking place.

Meanwhile, the Australian Financial Review reported on Friday that international mining company Xstrata has approached two of Macarthur’s shareholder, POSCO and ArcelorMittal, about a bid to rival the offer from America’s Peabody Energy.

The newspaper did not disclose its source for the information.

Peabody Asks Takeover Panel To Intervene In Macarthur Bid

US coal miner Peabody Energy has asked Australia’s Takeover Panel to block a shareholders’ meeting on Monday by takeover target Macarthur Coal to approve Macarthur’s acquisition of Noble Group subsidiary, Gloucester Coal.

If Monday’s meeting approves the Gloucester acquisition it would give Noble Group a stake of 24% in Macarthur effectively blocking Peabody’s bid for the Queensland miner.

Peabody wants the panel to provide an updated independent expert's report on the Gloucester bid and for the Macarthur shareholder vote on that bid delayed until at least two weeks after the report has been sent to shareholders.
Macarthur’s response was it was justified in not engaging with Peacock on the basis that the conditional bid was “not a superior proposal” to the Gloucester/Noble transaction. It said that this resulted in it not being permitted to engage under its Gloucester agreement.

"It is disingenuous for Peabody to now seek to delay the shareholder meeting in circumstances where it has not made a binding offer to Macarthur shareholders," Macarthur said in a statement to the stock exchange, adding "Your directors believe the Peabody [press] advertisements are self-serving and potentially misleading."
Macarthur rejected an independent report compiled in February which valued its shares at below the Peabody bid, saying that the report did not take into account gains in coal prices since then.

It rejected Peabody claims that Noble would have a controlling influence over Macarthur. It also said that a February independent expert's report valuing Macarthur shares at below Peabody's bid was out of date and did not take into account gains in coal prices.

Macarthur shares rose 5c on Thursday to $14.36, 36c higher than Peabody’s $14 a share bid.

Meanwhile the Australian Financial Review suggested that Macarthur is holding out for a $15 a share bid and that Peabody was offering major shareholders Posco, Citic Pacific Ltd. and ArcelorMittal to persuade them to accept the bid. The newspaper gave no source for its report.

Noble Tries To De-Rail Peabody Bid For Macarthur

Noble"would really like the Americans to go back home"

Singapore-based commodities trader Noble Group is threatening to derail Peabody Energy’s $3 billion bid for Australian coal miner, Macarthur Coal.

Peabody's bid is conditional on Macarthur not proceeding with a proposed A$832 million ($766 million) takeover of Noble-controlled Gloucester Coal, however Noble has reacted in a statement to the Singapore Stock Exchange and has accused Peabody of trying to spoil the bid.

"Life was great until a few days ago when, instead of jumping on their horses, the Americans charged into town on a Gulfstream jet for the afternoon and plunked a bid down that was a great deal for them, and not, in our view, anywhere near what was already on the table," Noble said in a statement on Monday.

"Hats off to them for being opportunistic and crafty; it ruined our Easter weekend. We will also have to give thought to other ways in which we would make the interlopers from St. Louis leave us alone," Noble said.

"What we would really like is for the Americans to go back home. We busted our tail to put together a good fair deal that will build a great company," it said.

Noble may well exercise its option to increase its stake of the Middlemount coking coal mine in Queensland to 50 percent, which would give it the right to sell 100 percent of output for the life of the mine.

Macarthur said Peabody's bid undervalued its growth prospects. The company produces a third of the world's supply of a cleaner coal coveted by steelmakers.

Macarthur Coal Receives Takeover Bid From US Miner

Peabody Bids $3 Billion for Macarthur Coal

Brisbane-based Macarthur Coal Ltd. has had a takeover approach from Peabody Energy Corp.the world’s largest private coal company.

Macarthur went into a trading halt Tuesday and said it had received an approach from a third party seeking a controlling interest in the company. Later in the day the company announced that Peabody Coal had bid A$3.3 billion (US$3.03 billion) but said that the A$13 a share bid “did not fully value the company and its growth prospects.”

Shares in Macarthur hit a high of A$14.50 before settling back to close at A$14.05, a rise of 16% on the day. Shares in Gloucester Coal, which Macarthur was planning to purchase in a deal with Noble Group, closed down almost 10% at A$9 on fears that the deal may not now go through.

The bid is the latest in a number of deals for Australian resource firms. Earlier this month Arrow Energy agreed to a A$3.44 billion joint bid from Royal Dutch Shell and Petrochina.