Procurement News Notice |
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| PNN | 5341 |
| Work Detail | A "once in a generation" turnover of the Australian coal sector has further to run, according to one of the driving forces behind two recent acquisitions, Taurus Funds Management. Fresh from finalising the purchase of Anglo American's Foxleigh coking coal mine, Taurus principal Gordon Galt said the firm was bullish about the long-term outlook for coking coal and the prospects of the new breed of small companies that have acquired mines during the recent cyclical low. Taurus lent $US42 million to Stanmore Coal to help it buy Vale's Isaac Plains mine in Queensland for $1 plus contractual obligations in July 2015. In April Taurus agreed to pay an undisclosed sum for Foxleigh before vending it into Realm Resources, which is 87.8 per cent owned by Taurus and has debt facilities worth about $180 million from Taurus. Realm indicated in recent days that Anglo was paid $43.7 million in cash and $85.3 million in bank guarantees under the Foxleigh transaction. Both acquisitions appear to be well timed, with the sale prices being agreed before coking coal prices surged by 40 per cent in the past month to levels not seen since 2013. The acquisitions are also indicative of the fragmentation of the local coal industry, which has seen struggling multinational miners sell almost a dozen marginal mines to small, single-mine companies. "The aggregators are breaking up and sending them back towards people who want to buy them," Mr Galt said. Taurus was a surprise buyer of Foxleigh, given the $1.5 billion funds manager is better known as an equity investor and lender of last resort to high-risk junior miners. Mr Galt said the equity and debt sides of Taurus were not always aligned on strategy, but he said the organisation was generally a subscriber to the notion that finite supplies of coking coal would continue to be in demand for steel production, particularly after 2021 when supply of coal is expected to decrease. That view is broadly similar to the outlook recently shared by BHP Billiton, which is understood to have bid for Anglo American's Moranbah North and Grosvenor coking coal assets "People don't concentrate on how much coal goes out," Mr Galt said, in a reference to depleting coal reserves. "Tens of millions of tonnes of high-quality coking coal are no longer there and you've got to get it from somewhere ... the mills still want their coal. "No money has been poured into exploration so nothing has happened there, you have negative movements delaying permitting and many other things, so we think it is a great opportunity." Mr Galt said the recent transactions would not be the last, and the large number of assets on the market was making it a good time to buy. "Anglo is selling all its assets, Vale is selling all its assets, and Peabody is selling quite a few of its assets, so there are a lot of these things on the market," he said. "I don't think they [opportunities to buy assets cheaply] come along every decade." The comments come just days after Street Talk revealed that Glencore was sniffing around Rio Tinto's Australian coal mines again, while Rio was considering packaging up its coking coal mines like Kestrel with its thermal coal mines in NSW. Coking coal prices have surged by 88 per cent over the past seven months on the back of new restrictions on Chinese coal miners that have reduced the number of operating days from 330 per year to 276 days. As one of the world's biggest producers of coking coal, BHP has more to gain from the price surge than most, but the company believes prices for the steel-making ingredient have overshot their range, and will slide lower before the end of the year. The remaining 30 per cent of Foxleigh is owned by two of the mine's major customers: Korean steelmaker POSCO and Japanese steelmaker Nippon Steel & Sumitomo Metal. |
| Country | Australia , Australia and New Zealand |
| Industry | Mining |
| Entry Date | 15 Oct 2016 |
| Source | http://www.afr.com/business/mining/coking-coal-deal-frenzy-has-further-to-go-taurus-funds-management-20160904-gr89hu |
