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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Surging Iron Ore Prices Boost Profits at Mitsubishi and Mitsui

Surging Iron Ore Prices Boost Profits at Mitsubishi and Mitsui

Surging iron ore prices are likely to boost profits at two of Japan’s largest trading houses.

Both Mitsubishi Corp. and Mitsui & Co., Japan’s two biggest trading houses, are forecasting higher profit this year on the back of increased prices for iron ore and coking coal.

Mitsubishi said on Friday said that net income may climb to 370 billion yen ($3.99 billion) in the year ending March 2011 - up from 273.1 billion yen a year earlier.

Mitsui expects profits of 320 billion yen, up 114 per cent on 149.7 billion yen a year ago.


Mitsubishi has stakes in iron ore mines in Chile and Canada and in a coking coal venture with BHP in Australia. It expects profits from metals to hit 185 billion yen this fiscal year compared to 137.9 billion yen in the year ended March. Earnings from energy are expected to climb to 73 billion – up from 71.9 billion.

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.

Northern Energy Lands Chinese Deal For Colton Mine

Mine Will Sell 65 Per Cent Of Output To Chinese Mill

Australia’s Northern Energy Corporation has agreed a multi-million dollar deal with the Xinyang Group in China to sell 65 per cent of coking coal mined at its Colton mine near Maryborough in Queensland over the next 10 years.


At current coking coal prices the agreement would result in $700 million revenue to Northern Energy over the next 10 years.


The company will issue 16 million shares to Xinyang, raising $23 million to develop Colton and securing 100 jobs anticipated at the site.


Northern Energy expects to mine 500,000 tonnes a year of coking coal for each of the next eight to 10 years, although the possibility of extending the life of the mine was not being ruled out.


“The agreement with Xinyang provides us with the capital to take the next step in the development of Colton while retaining 100 per cent of the project as we fully evaluate the size of the Maryborough resource base and the potential for further mine expansion,” managing director Keith Barker said.


“The size of the resource identified to date has exceeded our original expectations and the ongoing evaluation work provides us with confidence that additional resources will be defined which will in turn enable us to ultimately increase production beyond the 500,000 tonnes per annum currently planned. Expansion of production will require additional mining lease areas and will be subject to a separate approval process to that applicable to Colton.”

More Japanese Steelmakers Agree Quarterly Coal Contracts

In a further indication of a shift to quarterly raw materials contracts, more Japanese steelmakers have struck deals with coal miners for the April to June quarter.

JFE Holdings, Kobe Steel and Sumitomo Metal Industries have both agreed a price of $200 a tonne, up 55 percent from the deal for the previous financial year, the firms said on Wednesday. JFE and Kobe have signed deals with miners BHP, Rio and Teck Resources, while Sumitomo have agreed a deal with BHP.

While the steelmakers are all looking for a return to an annual contract from 1 July, the miners have the upper hand as they try to move to a system that reflects changes in the market, but which leaves the steelmakers exposed to greater volatility in cost and renders them exposed to the spot market.

Clines Raises Funds To Complete New Elk Mine Rehabilitation

Canadian coal miner Cline Mining has raised C$6.9 million to complete the rehabilitation of its New Elk thermal coal and metallurgical coal project in Colorado. C$3.9 million has come in the shape of a loan from Mitsui Matsushima International Pty of Tokyo with the rest coming from a private placement of shares and warrants.

The New Elk coking coal mine is situated near the town of Trinidad in Colorado. It has a coal resource of 315 million tons of coal and will directly employ 450 employees. The mine rehabilitation program is presently in due for completion in July 2010 with the first saleable production of coking coal expected in the fourth quarter of 2010. The mine will reach an annual capacity of 1.3 million tons in 2011, proceeding continuously to the production and sale of 3.0 million tons of coal annually, slated for world export markets.

The Mine has large in-place compliant coal resources and Cline expect further significant production in the future.

Shanxi Raises Coking Coal Price

The Shanxi Coking Industry Association has increased its coke guidance price for February by 50 yuan/tonne on month to 2,000 yuan/tonne. The Association gave a price surge in the upstream sector as its reason for the increase although analysts say that a reduction in capacity caused by the closure and merger of coal mines in the Shanxi region is the main factor.

On Tuesday the leading coking coal producer in China, Xishan Coal Electricity Group, raised the price of coking coal from 1,215 yuan/metric tonne in January to a record high 1,365 yuan/tonne in February.

Indian Coal Ministry Calls For Cut In Thermal Coal Import Duty

India’s coal ministry wants the country’s finance ministry to reduce the 5.1% import duty on thermal coal and to continue with the existing zero import duty on coking coal to facilitate larger imports by power and steel companies.
The demand for coking coal by India’s steel sector is expected to go up by 18-20% in 2010-11, however Coal India Ltd (CIL), which currently supplies 82% of the power sector’s thermal coal, will not be able to keep pace due to delays in developing new mining projects.

The Australian government wants the coal ministry to lobby for reducing the import duty on thermal coal and persist with the zero import duty on coking coal, since it eyeing an opportunity to supply more coal to India from Australia.

An Australian trade commission delegation, which recently came to India, presented a paper to the coal ministry saying reducing the import duty of thermal coal and keeping the zero import duty on coking coal intact would not only strengthen bilateral ties but would also enhance the availability of affordable inputs for two Indian infrastructure industry-power and steel.

An Australian trade commission delegation recently presented a paper to the coal ministry pointing out that coking coal imports, which were 12 million tonnes from Australia in 2006-07 would reach 18-20 mt in 2010-2011 and 25 mt in 2012, taking into account India’s increasing steel capacity.

The ministry estimatesthat import of coking coal and thermal coal would be a total 62.75mt by the end of 2009-2010, of which thermal coal would be around 40 mt. In 2008-09, India’s total thermal coal imports were 37.92 mt and coking coal 21.08 mt. Most of India’s thermal coal imports come from Indonesia however Australia is also looking for a slice of the thermal coal business.

Ableauction Buys Chinese Coke Producer

Online auctioneer ableauctions.com has bought SinoCoking, a coal and coke producer based in the Henan Province in the People's Republic of China, in a deal which will see the current Ableauctions board step down.

SinoCoking, which began producing metallurgical coke in 2002, currently holds mining rights for approximately 2.5 million tons of coal from mines located in central China.

Under the terms of the deal, ableauctions.com CEO Abdul Ladhia will step down from his role to be succeeded by Sinocoke founder and President, Mr. Jianhua Lv. In addition, the current board of directors of Ableauctions will step down to be succeeded by seven new directors designated by SinoCoking.

SinoCoking produced and sold 154,631 tons of coke, 55,360 tons of washed coal, and 72,923 tons of raw coal during the year ending June 30, 2009 generating $51 million in revenue from sales. During its 2009 fiscal year, SinoCoking had audited net income of approximately $17 million on a GAAP basis.

Czech Republic's NWR Agrees Coke Price Hike

Czech coal miner NWR said on Wednesday that it has agreed Q1 contracts with an 18 percent rise in coking coal prices and 29 percent rise in coke prices. The price of coking coal will rise to 103 euros under the new contracts. Coking coal makes up 60 per cent of NWR’s output.

The miner is targeting steady coal production in 2010 after hitting 11 million tonnes last year, having earlier estimated production at 10.5 million tonnes for the year. A recovery in the central European steel industry has led to an increase in demand for NWR’s coking coal products.

Jindal, Rockfield End Takeover Talks

Australian coal miner Rocklands Richfield has ended takeover talks with India's Jindal Steel and Power. Rockfield said talks had ended because the deal was not in the best interests of shareholders.

Jindal last month matched an offer of 56c a share from China's Meijin Energy Group for the coking coal developer, valuing Rocklands at A$197 million.

Negotiations began in September when the two parties agreed a takeover by Jindal at 42c a share which valued RCI at $146mn. Two further parties – India’s Essar group and Chin’s Meijin – then joined the bidding battle although Essar suddenly quit the bid without citing any reason. Both Jindal and Meijin have bid $197mn for RCI.

Rocklands has coal tenements in Queensland that it estimates hold more than 900 million tonnes of coal and has a coking coal plant in eastern China.

China To Eliminate Outdated Production Capacity

The government will step up efforts to eliminate outdated production capacity, said a statement issued by the State Council on Wednesday.

Eliminating outmoded production capacity was imperative to transform the economic growth pattern, boost economic growth quality and fight the global downturn, said the statement issued after a State Council executive meeting chaired by Premier Wen Jiabao.

Eliminating outdated production capacity was also necessary to promote energy efficiency and emissions cuts and address global climate change, the statement said.

China had made positive progress in eliminating outdated production capacity, but the proportion of outdated capacity was still too high in certain key fields, said the statement.

The problems should be tackled through the law, economics, technology and necessary administrative methods.

The State Council discussed specific targets to eliminate outdated capacity in fields such as electricity, coal, coke, ferroalloy, calcium carbide, iron and steel, non-ferrous metals, construction materials and light industry and textile industry.

To realize the targets, efforts should be made to improve market admission requirements, use market mechanisms, strengthen law enforcement, promote stimulus mechanisms and step up supervision, according to the decision reached at the meeting.

Source: Xinhua

Shanxi Coke Hikes Coke Guidance Price

Affected by the increase in steel products and the coking coal price, at the beginning of 2010, the Shanxi Coking Association has adjusted the coke guidance price. On January 4, reporters learned that coke price including tax for January is 1,850 yuan per ton, up by 100 yuan per ton than December, 2009.

Reporters learned that in December, Shanxi Shandong Coking Association raised the coke guidance price by 50 yuan per ton, reaching 1,750 yuan per ton.

An expert pointed out that if the coke price is lifted once more, the growth rate has reached 100 yuan per ton, which means that insiders are optimistic about the future of the steel industry.

Reporters learned that domestic steel price index this week will rise slightly, up by 1.5%.

It is said that currently steel mills' coke stockpiles are not high. The demand from the market is strong, coking enterprises are operating with full capacity, and they are not holding much inventory with smooth deliveries.

Source: Alibaba

China Eliminate 82mn Tonnes Of Dated Coke Capacity

China's National Development and Reform Commission, Ministry of Industry and Information Technology and National Energy Administration held a joint press conference regarding the curbing of overcapacity and excessive construction activity in some industries as well as facilitating healthy and sustainable industrial development.

Mr Yuan Longhua, MIIT raw materials department deputy director, pointed out at the conference that the document entitled Criteria for Entering the Coking Industry revised and published by the MIIT has raised the threshold for entry to the industry by publishing the list of enterprises which conform with the criteria.

According to the relevant requirements, China has been scheduled to eliminate a total of 80 million tonne of dated coking capacities during the Eleventh Five Year period while total eliminated capacities in the period have already reached 82.54 million tonne surpassing the target by 2.54 million tonne.

It was also announced by the three government authorities at the conference that China will not approve any newly-built coke, calcium carbide, methanol and other traditional coal chemical projects while there are currently no pilot schemes for coal oil and natural gas.

Source: Steel Guru/Metal Biz

Utah Miner Buys Chinese Coking Plant

America West Resources Inc., a Salt Lake City-based coal company, said Wednesday it has signed a binding letter of intent to purchase a coking coal facility in China.

After the deal is finalized, America West expects to invest $70 million into the Luxin coal plant in Shanxi Province in northeastern China.

In return, company chief executive Dan Baker said America West "effectively diversifies our business, establishes a critical gateway to China and materially strengthens our financial profile. As such, we believe we are much better positioned to pursue a listing on a national exchange on an accelerated timetable."

The coking plant has been owned by the Shanxi Jiexiu Luxin Coal Gasification Co., which also has nearby coal mines that supply metallurgical coal used to produce steel.

Baker said the coking plant also generates electricity using synthetic gas produced through coal gasification, a technology important to efforts to capture carbon emissions after combustion.

Under terms of the agreement, America West will spend $40 million to acquire a 70 percent interest in an offshore company through a 30-year "Contractual Joint Venture," an approved form of foreign investment in China. Shanxi Jiexiu's current management will retain the remaining 30 percent.

America West also will contribute $30 million in "working and expansion capital" to the joint venture, which will have contractual rights to Shanxi Jiexiu's estimated


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coal reserves of 100 million tons. The Chinese company will still manage the plant, with America West's oversight.

While Chinese coal will supply the plant's short-term needs, Baker noted that America West has purchased metallurgical coal reserves in the Book Cliffs field in Carbon County. That Utah coal, still in the early stages of development, could be exported to Luxin when Chinese sources are used up.

"This acquisition is ideally aligned with our company's long-term metallurgical coal-export strategy," he said.

For the first six months of 2009, Baker said Luxin reported revenues of $60 million and earnings of $9 million.

Last year, the Luxin had earnings of $22 million on revenues of $140 million.

Financial data will be verified before the transaction closes, he added.

America West also operates the Horizon mine north of Price. Its coal is burned in power plants.

Source: Salt Lake Tribune

Jindal Has Competition In Race For Rocklands

Jindal Steel & Power Limited has a new competitor in the race to acquire Australian coal miner Rocklands Richfield.

China’s Meijin Energy Group has come up with a higher offer, which has found favour with the existing management of Rocklands.

The Australian company has asked Jindal Steel to come back with a matching or higher bid, otherwise, it would terminate the ongoing discussions and allow the Chinese player to start exclusive talks.

Meijin is the third company to bid for Rocklands in as many months — India’s Essar Group had thrown its hat in the ring but soon opted out, leaving Naveen Jindal’s JSPL alone in the race.

Meijin Energy has offered to pay Australian dollar (AUD) 0.52 a share for Rocklands, higher than the AUD 0.42 being offered by JSPL.

Incidentally, Essar had offered AUD 0.50 a share for the Australian company but it did not receive formal support from the Rocklands management.

A Rocklands notice to the Australian Securities Exchange said it had received the Meijin bid on November 2, and after “careful consideration” it found that the bid was “superior” to the Jindal offer, which is 37 per cent lower.

However, the Rocklands board told its shareholders that neither the Jindal nor the Meijin proposals were formal offers at this stage. They are preliminary in nature and subject to due diligence, it said.

JSPL is carrying out a due diligence exercise after both parties signed a term sheet on September 22. According to the pact, Jindal was to complete the due diligence by October 31 and negotiate an implementation agreement by November 15.

On October 28, JSPL sought another month to complete the due diligence and sign the deal by December 15.

JSPL plans to invite Rocklands chairman Benny Wu to India for deliberations after it finishes its groundwork.

JSPL vice-chairman Naveen Jindal plans to visit Australia and China — where Rocklands has large operations — reflecting the Indian company’s keenness and commitment to the proposal.

Before the Meijin proposal came, both Rocklands and JSPL had agreed to extend the due diligence date to November 24 and seal the deal by December 8.

However, JSPL now faces the risk of being beaten by the Chinese company, which claims to be one of the biggest coke producers in China owning 10 coal mines with a combined reserve of 2 billion tonnes. The Meijin proposal values Rockland at AUD 200 million.

JSPL is one of the largest steel long products manufacturers in India with a mill in Chhattisgarh. It also runs a power plant there. The company is building a plant in Orissa and also expanding its power plant capacity in Chhattisgarh.

As the bid battle continues, JSPL has built up a strong position in Rocklands. It now holds a 14.16 per cent stake in the company. The shares were bought in three tranches from the open market and at a price lower than its own offer and that of Meijin.

Rocklands has two main assets — met coke plants in China and coal mines in Australia.

Source: Calcutta Telegraph

Essar Drops Out Of Race For Rocklands

Essar Steel has dropped out of the race to acquire Rocklands Richfield, leaving only Jindal Steel & Power in the fray.

The move by Ruia-owned Essar, which has interests in steel, shipping and telecom, comes less than two weeks after it joined the race for the Australian coal miner.

Rocklands today informed the Australian Securities Exchange that Essar did not wish to proceed with its AUS$0.50-a-share offer, which was made public on October 7.

Essar made the preliminary and non-binding offer even after Congress MP Navin Jindal’s JSPL signed a term sheet on September 22 with Rocklands.

JSPL had proposed to acquire a 100 per cent stake in the Australian company for AUS$0.42 a share.

In a letter to Rocklands, the Ruias did not offer any explanation on why they chose to exit abruptly.

An Essar spokesperson said: “As a group we keep looking at various opportunities but it is not our policy to comment on any specific deal.”

Once Essar’s withdrawal was made public, Rocklands’ share plunged 15.29 per cent to close at AUS$0.36.

Rocklands said Essar’s decision was based on external considerations and was not a reflection on the company.

Confidential and non-public information was not shared with the Essar management during the period its bid was valid.

Rocklands has written to Essar seeking clarifications on why it withdrew the proposal and whether it is possible for Essar to continue with the proposal. Essar will reply to the letter next week.

The Rocklands management was happy to see two Indian firms bidding for the company.

In the absence of Essar’s proposal, JSPL’s offer is now on. Rocklands said JSPL was already carrying out a due diligence exercise.

JSPL holds a 12.75 per cent stake in Rocklands. The firm shored up its holding in the Australian miner after Essar’s proposal became public.

Rocklands claims to have coal resources of 900 million tonnes. JSPL is setting up steel and power plants in the country and will require coal, especially the coking variety not abundantly available in India.

Rocklands has two main assets — met coke plants in China and coal mines in Australia.

Source: Calcutta Telegraph

Hwange Colliery Resumes Coke Production

Hwange Colliery Company resumed coke production yesterday with its battery discharging 60 tonnes of the critical input for metallurgical industries.

It is a gradual recommissioning process that will see the 22-year-old plant operating at full capacity next week.

The battery stopped working in February this year after most of its 32 ovens ceased operating.

Hwange, the largest coal miner in Zimbabwe, had engaged consultants from Arcelor Mittal, the world’s largest steel marker, Forosbel Africa (Private) Limited of South Africa and the Zimbabwe Iron and Steel Company. The companies use coke in their production process.

"We have already pushed (discharging coke) from six ovens and we are hoping to operate at full capacity by the end of next week," HCCL spokesperson Burzil Dube said.

He said the plant, key to the survival of the colliery would produce at least 18 000 tonnes a month when operating at full capacity.

HCCL marketing manager, Mr Charles Zhou said the company would now focus on resuscitating lost markets when the plant was down.

"Our customers never stopped operating because Hwange was unable to supply.

"This means that they were getting the product from somewhere else. Now that the product is available, Hwange will work to revive traditional markets and we are hopeful that we will be able to regain them," Zhou said.

Hwange Colliery markets coke in three broad categories namely foundry coke, metallurgical and coke peas.

Hwange used to supply coke to South Africa, Mozambique, Zambia and the Democratic Republic of Congo.

The initial stage under the resuscitation had been charging tar into the oven to achieve an average of between 800 and 1 000 degrees Celsius.

This was followed by infusion of liquefied petroleum gas that culminated in temperatures rising above 1 050 degrees Celsius suitable for burning coking coal to produce coke.

The coke oven battery was commissioned in 1987 by a British company, Otto Simon Carves.

Source: Zimbabwe Herald

China Coke Recovery "Unstable"

Shanghai Securities News cites Mr Huang Jingan, chairman of China Coking Industry Association, in response to the reviving coking industry in May and June as saying that market risks are still worth attention in the second half of 2009 against a backdrop of overcapacity.

Mr Huang said "Although steel price has climbed and coke price has increased, the whole coking industry still suffer losses. Only some independent coking enterprises can gain profits.”

He pointed out that “Boosted by the country 4 trillion stimulus package outputs of steel and coke in this year may break 500 million tonnes and 300 million tonnes respectively. However, total capacities record over 600 million tonnes and 400 million tonnes respectively. More than expected output growth will knock down product price hence total output needs to be restricted.”

Mr Huang said “Besides loan increment in the H1 of this year has exceeded full year target. Uncertainties exist for credit scale and then steel and coke markets in the H2. Shrinking worldwide demand indicates exports of steel products, coke and related chemical products can hardly turn better.”

He added that “Given tight supply and high price of coking coal, domestic enterprises have to import coking coal. Statistics show the country coking coal imports surged 3.4 times to 12.8 million tonnes in H1. Although coking coal imports have slowed down, total imports in this year is still likely to surpass 20 million tonnes.”

Mr Huang criticized that despite existing overcapacity, some furnaces are still expanding capacities buoyed by local governments' philosophy that investment will boost economic development. He said that "Some projects under planning are 5 million tonne grade or even 10 million tonnes grade production bases. These fresh capacities, especially blind expansion without targeted stable market, are of high market risks."

Source: Steel Guru/Shanghai Securities News

Rare Metals Restriction "Failing To Protect China's Resources"

China's policies restricting exports of certain rare metals fail to protect the country's resources and undermine its validity to tap overseas resources, according to a report on China's mining industry.

The nation should adjust such policies so as to oppose resource protectionism, said the report, which was composed by a research team under the Chinese Academy of Social Sciences' Institute of Industrial Economics after research on domestic mines and enterprises of various kinds.

Late last month, the US and the EU filed a complaint with the World Trade Organization (WTO) against China on raising export taxes and reducing the export quotas on some raw materials, including some rare metals. They argued that the policy is not in line with China's commitment when it joined the WTO in 2001.

Luo Zhongwei, a professor who led the research, said China has rich deposits in rare metals and the government seeks to protect such resources.

"But disordered competition among domestic mining companies, particularly small-scale players, has led to great damage to many rare metal mines. It also causes problems of serious pollution and waste of resources," he said.

Luo said as a major metal consuming country in the world, China is in shortage of 80 percent of its mining resources. Restrictions on exports of certain rare metals also impose barriers for the country to tap overseas resources.

"The government should have a vision of 'global resources' and take advantage of overseas resources as well," the report said.

Instead of imposing restrictions on exports of rare metals, the report suggested the central government to take back the mining rights from local governments for better administration and higher efficiency.

Many mines could be kept unexplored when technologies are not ready, it said.

The Ministry of Commerce has defended China's restrictions on exports of certain raw materials, such as coke, bauxite, fluorspar, magnesium, manganese, silicon carbide, silicon metal, yellow phosphorus and zinc, saying that its policies were in keeping with WTO regulations and meant to protect valuable natural resources.

"The main purpose of certain export measures is to protect the environment and precious resources. These policies are in line with WTO rules," it said.

Meanwhile, the report also suggested China to establish a capital market for the mining industry because modern mining is a capital-intensive sector.

Luo said only listed firms should be allowed to be involved in mining as it helps to keep the mining market transparent and orderly.

Source: China Daily