New Delhi: The country’s largest coal mining firm, Coal India Ltd (CIL), is in talks with a West Australian private sector mining firm for acquiring a coal block with in-place reserves of 150 million tonnes (mt).
The state-owned company is also preparing for a November listing and plans to file the draft red herring prospectus by August next year for a 15% divestment.
“This is the timeline for the listing of our IPO (initial public offer),” said Partha S. Bhattacharyya, chairman of CIL.
Right timing: CIL chairman Partha S. Bhattacharyya. Indranil Bhoumik / Mint
The mine the company wants to acquire, which is partly explored, is located north of Perth and the process will involve acquisition of the coal firm with the promoters keeping a stake.
“We have engaged technical consultants to do due diligence. We have to take a view on it,” said Bhattacharyya.
Going by recent coal deals, if the reserves are not proven, the valuation of a mine is around 10-20 cents per tonne. For proven resources, it is 50-60 cents per tonne. Operational mines come with a much higher price tag of around $2-3 per tonne.
CIL is targeting a production of 435 mt this year, against 403.73 mt in 2008-09, having posted a profit of Rs300 crore on a turnover of Rs46,000 crore last year.
CIL had a consolidated cash balance of Rs29,665 crore at the end of the fiscal 2009 and is looking at coal mining opportunities in countries such as Mozambique, Bangladesh, Indonesia, South Africa and Australia.
Analysts say coal mining in Australia is advantageous as it compares with other traditional coal-rich geographies such as Indonesia and South Africa.
“Australia may be a good destination for coal mining asset acquisition due to better quality of coal. The relative disadvantage for its distance in comparison with Indonesian coal is sufficiently set off by the stable political and regulatory framework for the mining sector in Australia,” said Dipesh Dipu, principal consultant (mining) with audit and consulting firm PricewaterhouseCoopers.
“With rapidly rising exports out of Indonesia, the quality of coal may suffer. The recent changes in the mining laws that require domestic market obligations also are likely to make Indonesia-focused strategies uncertain. Similar risks exist with South African coal as well. Hence, Australian ventures may be the way to go. However, Australian coal with partial ownership may not help obtain a preferential price due to stricter minority interest safeguard rules of the country,” he said.
India has 256 billion tonnes (bt) of coal reserves, of which around 455 million tonnes per annum (mtpa) is mined. It imports around 40 mt of coal.
Demand is expected to reach around 2 bt a year by 2031-32, around five times the current rate of extraction, with most of it coming from the power sector.
Regarding the listing, the state-owned miner wants its employees and people who have had to give up land for its mines to become shareholders.
“Whoever is going to give me land, I should give them an option for getting shares. We have sought legal opinion for the same (because) as of now there is no precedent for any such thing. Unless, we do this, the share issue wouldn’t take place,” Bhattacharyya added.