Race for Bandanna enters the second phase

Race for Bandanna enters the second phase

New Delhi: The race for Australian coal miner Bandanna Energy Ltd has entered the second phase with representatives from interested companies such as state-owned NTPC Ltd visiting Australia for a physical inspection and data collection.

Bandanna, a firm listed on the Australian Securities Exchange, claims to represent the largest thermal coal inventory for any exploration company in Australia and has seen interest from other Indian companies such as GMR Infrastructure Ltd, Jindal Steel and Power Ltd (JSPL), Aditya Birla Group and JSW Steel Ltd, which have submitted a non-binding bid. The transaction could involve partial or total sale of Bandanna’s assets.

“After the non-binding bids were submitted, a shortlist was made. Now, the shortlisted companies have been called one by one for the physical inspection, analysis of log details, geological data and the mine plan. Once the due diligence based on all information is over, a price bid will be quoted by the interested companies," said a person familiar with the development, who did not want to be identified.

There has been a surge of interest from Indian firms in securing assets overseas as the coal ministry has been unable to ensure coal supplies to sectors such as power and steel. Coal is abundantly available in the country, but its exploitation has been hobbled by lack of investment and concerns over environmental damage.

While questions emailed to Bandanna on Tuesday remained unanswered, NTPC chairman and managing director Arup Roy Choudhury confirmed his firm’s interest and said that a team from NTPC visited Australia last week.

A senior JSPL executive, who declined to be named, confirmed his firm’s interest in Bandanna. JSPL has a local office in Australia.

Bandanna holds 16 exploration permits in the Bowen and Galilee basins in coal-rich Queensland apart from licences to explore for minerals and oil shale in the state, according to the company’s website. It has reserves of at least 1.4 billion tonnes of coal.

“This is a time-consuming process. We were the third company to be called by Bandana for the second stage process," said a senior NTPC executive aware of the visit, who did not want to be named.

The Indian firms are believed to be in competition with state-run Chinese miners such as China Shenhua Energy Co. Ltd and Yanzhou Coal Mining Co. Ltd, which are actively engaged in acquiring mining concessions overseas.

According to the BP Statistical Review of World Energy, the world’s coal consumption grew by 7.6% to 250 million tonnes of oil equivalent (mtoe) with China and India increasing their consumption by 10.1% (54.1 mtoe) and 10.8%, respectively.

While a GMR spokesperson declined comment, Raaj Kumar, chief executive of GMR Energy Ltd, the holding firm for GMR Group’s energy business, had earlier said: “We have progressed into the second stage of the transaction process for Bandanna Energy... The due diligence has started."

While JSPL and Aditya Birla Group spokespersons declined comment, questions emailed to JSW Steel spokesperson remained unanswered.

Australia is the largest exporter of metallurgical coal and the second largest exporter of thermal coal. Australia offers better coal quality along with a sound regulatory environment, but valuation of the coal concessions and transportation costs are high in the country. Analysts say that the mines located in the western and north-western part of the country suit Indian demands as the shipping distance is shorter as compared with concessions located in other parts of the country.

India has known coal reserves of 264,000 million tonnes (mt), the fourth largest in the world, of which proven reserves are around 101,000 mt. Demand is currently around 600 mt per annum (mtpa) and is set to touch 2,340 mtpa by 2030.