Gujarat NRE Coke won’t raise Rey Resources bid

Gujarat NRE Coke won’t raise Rey Resources bid

Mumbai: Mining firm Gujarat NRE Coke (GJNC), which has made a takeover bid to acquire Australia’s Rey Resources, will not hike its offer if share prices continue to rally, said a top official.

“Prices have run up after our takeover bid... if it moves up further we will not increase our bid. If we start bidding higher, we’ll be bidding against ourselves," said managing director of GJNC Arun Kumar Jagatramka.

Rey shares have jumped over 250% since the takeover offer, which is valid up to 4 September, first came in June from Gujarat NRE Minerals, the Australian unit of Gujarat NRE Coke. Rey Resources owns coal, oil and gas tenements in west Australia.

Gujarat NRE is eyeing growth from Rey’s 500 million tonnes of coal resources, which needs to be explored, Jagatramka said, adding they have not earmarked any investments yet. Also, the firm is open to more acquisitions in Australia if valuations come cheap but is not in talks with anyone, he said.

Ride on local demand

The miner has been receiving export enquiries from Europe and South America over the past three weeks, after a slack periof of 6-8 months, which saw no exports as demand slumped in key recession-hit economies of the world, Jagatramka said.

However, the firm is riding on local demand with its key customers—steel producers—raising capacities. India’s steel demand is expected to show annual growth of 10% soon as the outlook for the sector has brightened, steel secretary PR Rastogi had said.

“Besides, hopes that coking coal prices will rise on a supply shortfall and robust Indian demand is holding back Gujarat NRE from signing any export deals now," Jagatramka said.

“For exporting, you need to commit a specific size and quantity for shipment. Looking at the demand in India, I’m reluctant to commit at today’s prices because I can see prices going up," he said.

“Coke prices have nearly halved from a high of $755 a tonne last year," Jagatramka said, without putting a finger on where he saw prices in the near-to-mediam term.

The company’s fortunes are largely dependent upon its product prices, which had slumped late last year resulting in losses. However, demand recovery and improvement in prices saw the firm turning to profit of 36 million rupees in the June quarter. It is expanding its coke facility and setting up power plants to meet rising demand and has earmarked capex of 3 billion rupees.

“There can be a lot of upside in prices looking at the supply scenario. The supply from China, the only major exporter in the world, has actually totally dried down," Jagatramka added.

Shares in the firm, which have more than doubled this year, with most of the gains coming in July on buoyant demand outlook, opened strong and were up 0.76% at Rs53.15, at 12.23pm, in the Mumbai market.