UPDATE 1-Australia's Cockatoo lines up Asian funding for coal expansion
* Trader Noble Group backs Cockatoo
* Coking coal prices have bottomed, Cockatoo CEO says
* Cockatoo sees appetite from Chinese for coal assets (Adds Cockatoo CEO comments)
MELBOURNE, Oct 18 (Reuters) - Cockatoo Coal Ltd has managed to line up funds from three Asian firms for a A$286 million ($275.49 million) coal mine expansion in Australia in a sign of confidence in long-term demand for coal used in steel mills.
At a time when almost no one is investing in mines due to a slump in coal prices, Noble Group Ltd has agreed to take a 21 percent stake in Cockatoo and South Korea's SK Networks Co Ltd's and Indonesian coal miner Harum Energy Tbk PT have agreed to increase their stakes.
"I believe we've seen the bottom of the market. We've seen improvement in the prices for coal over the last few months. We're starting to see interest from buyers in this space," Cockatoo Managing Director Andrew Lawson told Reuters.
Spot prices for coking coal used in steel mills have dropped from a high this year of around $170 a tonne to around $150 a tonne, but have recovered from a low of $130 in July.
Cockatoo's Baralaba mine in Queensland, minority owned by Japan's JFE Shoji Trade Corp, produces a coal called ultra-low volatile pulverized coal injection (ULV-PCI) used in steel mills. Only about 40 million tonnes a year of ULV-PCI coal are produced globally.
"Of all the different sectors of coal, that's the area with the best growth dynamics at the moment," Lawson said.
He said the product was coveted by steel mills in Japan and South Korea as it would help reduce their raw materials costs and help them compete more effectively against Chinese and Indian steel mills. Lawson said Chinese operators were also looking for coal assets.
Together Noble, SK Networks and Harum have committed to buy at least A$113 million in new shares as part of a A$153 million equity raising, Cockatoo said on Friday.
The money raised will be used to repay a loan to Korea Exchange Bank and help fund the expansion of its Baralaba mine in the Bowen Basin, Australia's biggest source of coking coal.
Cockatoo expects to start producing from the expansion in mid-2014, and aims to reach full capacity of 3.5 million tonnes a year in late 2016 up from about 750,000 tonnes now.
Australia and New Zealand Banking Group has fully underwritten a A$255 million project finance facility for the expansion.
Noble opted to back Cockatoo and agreed at the same time to sell its 51.2 percent stake in coal explorer Blackwood Corp Ltd , selling into a scrip offer from Cockatoo worth A$21.8 million for Blackwood.
"It was important to Noble not to have competition for their affections from two different parties in the same area. They wanted to have one horse in the race, essentially," Lawson said.
Blackwood shares jumped 16 percent to A$0.087 after the offer was announced.
SK Networks' stake in Cockatoo will increase to 25.8 percent following the placement, while Harum's stake will increase to 12 percent.
($1 = 1.0382 Australian dollars) (Reporting by Sonali Paul; Editing by Michael Perry)