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Australia’s Linc In Talks With Adani For Coal Deal

02 August, 2010

Linc Energy confirmed it was in talks with Adani Enterprises to sell a key coal asset for a reported A$1 billion ($904.2 million) in what could be the largest single purchase by an Indian firm in Australia’s mining sector.

Linc, whose primary business is underground coal gasification, said it was also talking with others to sell its Galilee coal tenement in Queensland state, and flagged more deals in the coming weeks, sending its shares up 19 percent.

“We expect an announcement on the sale of the Galilee tenement to be fairly imminent, probably by end of the week,” Linc Chief Executive Officer Peter Bond told Reuters.

Bond said a second separate deal on the sale of its Teresa coal tenement could come within weeks.

Linc was working on the sale process for Galilee and an agreement had not yet been reached on the contract terms, Bond said, declining to say whether the sale would fetch more than the A$1 billion, as reported in newspapers.

“We are also in well-advanced talks on the sale of the Teresa tenement and we’ll focus on that once Galilee is done. A deal will probably come some weeks after Galilee,” Bond said, adding that he was in deep negotiations with firms from India, the United States and Australia on the sale of the Teresa tenements.

Late last month, Adani Enterprises raised $850 million in a share sale and a source with direct knowledge of the matter said on Monday that an agreement to buy an asset from Linc for about A$1 billion may be clinched in a couple of days.

The deal with Adani, if finalised, could herald more Indian investments amid forecasts of an acute coal shortage in the developing nation.

The Indian firm declined to comment on Monday.

For a graphic on India’s coal imports, click here

Bond said Linc may also announce the sale of another coal asset in the coming weeks.

“We still have one more major coal asset that we haven’t spoken about before. We will start looking at it as a potential asset sale over the next few weeks.”

Linc shares surged to a more than 10-month high on Monday and traded up almost 18 percent at A$1.88 at 0440 GMT against a 0.86 percent rise in the broader market..

Shares of Linc have rallied over 85 percent since the start of July after the firm said it had received a written offer for three coal assets put up for sale last year and after Adani’s fundraising on the Mumbai stock exchange, which it said was for investments in coal mining and oil and gas exploration.

Linc has been trying to sell its Teresa coal tenements in Queensland for more than two years, after a deal with China’s Xinwen Mining Group for A$1.5 billion in 2008 and subsequent talks with Yanzhou Coal fell through.

It later expanded sale process to include its Galilee and Pentland coal tenements, which Linc has said have excellent coal mining potential.

INDIAN INVESTMENT

Adani, which has interests spanning electricity, coal, oil and gas, real estate and agricultural commodities trading, has been scouring for coal mines in Australia to secure supplies for domestic sale and for some of its own power stations.

Citing sources close to the deal, the Australian newspaper reported on Monday that Adani chairman Gautam Adani travelled to Australia late last week to finalise the deal with Linc’s chief executive Peter Bond.

The Sydney Morning Herald said Adani is expected to set a production target of 50 million tonnes in the next four years.

The Galilee tenement covers 231 square kilometres and has total inferred resources of 7.3 million tonnes of quality thermal coal, while its Teresa tenement has an inferred certified resource of 852 million tonnes of coal.


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Australia’s Linc In Talks With Adani For Coal Deal

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