DEALTALK-Buyers eye Felix coal despite market gloom

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By Denny Thomas

SYDNEY, Sept 26 (Reuters) - A planned sale of Australian coal miner Felix Resources Ltd (FLX.AX) has generated interest from local and global miners despite recent market volatility, but the high price expectations could delay a deal.

Felix, which has a market value of around A$3.4 billion ($2.8 billion), could be attractive to global miners such as BHP Billiton Ltd (BHP.AX)(BLT.L), Rio Tinto Ltd (RIO.AX)(RIO.L), Xstrata (XTA.L) and Vale (VALE5.SA), analysts and bankers say.

China's state-owned CITIC Group could also be interested, one banker, not involved with the deal, said.

Felix's Moolarben project is the key future earnings driver, with UBS estimating its net profit will more than double to A$1.12 billion by fiscal 2011.

Development of that project got a boost on Thursday after the New South Wales state government amended the mining leases, helping end a protracted battle with Xstrata.

Felix, which received incomplete proposals in July, has appointed Citigroup (C.N) and local investment bank Wilson HTM as its advisers.

"Purposely (we are) not running a timetable because that is not sensible in this environment or when you are receiving interests," one source with direct knowledge of the deal said. He declined to be identified as the sale process was confidential.

"It's pretty easy to see all the big players here in Australia, and any number of them would find them attractive. Also guys which are not in Australia, who want to come in, Felix provides a substantial entry point," the source added.

He declined to comment on speculation that Xstrata, Vale and BHP are among the parties who have made indicative offers.

"It's probably more likely to go with a major miner than a Chinese acquirer. They can finance quite quickly. They're not worried about paying for things at a decent price," said another source with direct knowledge of the matter.

MERGER BOOM

Takeover activity has been rife in Australia's coal sector.

Earlier this year, Xstrata bought Resource Pacific Ltd for about A$1.1 billion, while the world's top steelmaker ArcelorMittal (ISPA.AS), South Korea's POSCO (005490.KS) and CITIC jointly own half of Macarthur Coal Ltd (MCC.AX).

Despite optimism about coal, bankers say bidding for Felix was unlikely to reach the feverish level seen for Macarthur.