Coal price slide could spur mass asset sale

16 February 2016, Week 06, Issue 344

Private equity groups are queuing up to acquire coal assets in Australia and South Africa as major players such as Anglo American and Rio Tinto step up the sale of mines.

The big mining companies are expected to “open the flood gates” of a mine assets sale this year as they seek to cut losses and balance the books, the Sydney Morning Herald said, quoting investment management firm BlackRock.

The forecast of a coal assets sell off was made at a major industry conference in Cape Town last week. It comes amid reports that coal and other commodity prices could slide even lower this year before bottoming out.

“The industry is splitting into two classes of citizens: those under distress and those that will impress by riding out the downturn and coming out on the other side in a stronger position heading into the next cycle,” the Herald commented.

Anglo American is being tipped to sell all its coal assets in South Africa, the paper said quoting conference sources, and this week announced more cuts in Australia.

The company currently owns seven thermal mines in South Africa.

Coal India Limited (CIL) disclosed this month that it is considering buying coal assets in South Africa as part of an overseas expansion to meet Indian demand. India imported a record volume of South African coal last year – 36 million tonnes, according to data from IHS Energy.

The coal sell off this year was underlined in an announcement by Anglo American on February 16 that all of its Australian coal mines are now up for sale, Australian media reports said.

As Anglo seeks to offload up to US$4 billion of assets worldwide in 2016, chief executive Mark Cutifani described its Australian coal mines as “non-core,” The Australian newspaper said.

The Anglo sell off will include its two best mines in Australia, the newly expanded Grosvenor with a capacity of 5 million tonnes per year, and Moranbah, both in Queensland.

Rio Tinto also continues to reduce its Australian coal interests, selling its 10 million tonne per year Mount Pleasant mine in New South Wales to Indonesian-owned Mach Energy for US$224 million in January.

Edited by

Richard Lockhart

Editor

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