UPDATE 1-BHP fails to find buyer for Australian coal mine

Wed Jul 31, 2013 12:12am EDT

Related Topics

* BHP to continue operating Crinum underground mine

* Rio Tinto looking to sell coal assets in Australia, Mozambique

By Sonali Paul and Jackie Range

MELBOURNE/SYDNEY, July 31 (Reuters) - BHP Billiton said on Wednesday it has decided not to sell its Gregory Crinum coal mining complex in Australia, a move that could bode ill for other major miners looking to dump assets amid a sharp downturn in the coal market.

The mine, one of about 10 assets the company is trying to sell, was thought to be worth about $400 million, according to one analyst, while a newspaper had speculated BHP was hoping it would fetch around $800 million.

Bankers said BHP's failure to sell would weigh on other potential deals in the market, such as Rio Tinto's proposed sale of its Clermont coal mine and a minority stake in its Coal & Allied joint venture, worth about $3.2 billion.

Now BHP had removed Gregory Crinum from the market, those two assets were "hanging in the balance and may have the same outcome," said a banking source, who declined to be named because bidding processes are confidential.

"Coal just looks pretty hard," the banker added.

BHP Billiton said in a statement emailed to Reuters that it had decided not to go ahead with a sale of Gregory Crinum following a strategic review of the mine, "including investigation of potential divestment".

BHP closed the open cut Gregory mine last year because it was losing money, but said on Wednesday that recent operational improvements at the Crinum underground mine supported its decision to continue operating the site.

The Gregory Crinum complex, owned by the BHP Billiton-Mitsubishi alliance, produced 854,000 tonnes of coking coal used in steel making in the year to June 2013, mostly from the underground mine.

Linc Energy was among the companies that looked at buying the operation.

With thermal coal prices down about one-third over the past 18 months and coking coal prices down about 40 percent, the world's biggest producers have been slashing jobs, shelving expansion projects and putting some assets up for sale.

Beyond Australia, Rio Tinto is considering selling a stake in its Mozambique coal business, working with investment bank UBS. It took a $3 billion writedown on the coal business there in January.

Potential bidders are happy to look over coal assets because it enables them to build up intelligence about what's on the market, bankers said, but that does not necessarily translate into deals.

"Clermont's got a lot of people kicking the tyres but I can't imagine that it's going to be an easy process," said a second banking source. "It's whether they actually put their hand in their pocket and pull out a dollar and pay for it, that's the other thing."

Rio Tinto is also talking to rival Glencore Xstrata about a potential coal alliance in Australia to help cut costs.

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