Coal price not right as Kestrel mine owners seek $4.8bn pay dirt

The price of coking coal has declined about 25 per cent in the past four months, to $US188 a tonne.

The owners of the Kestrel coal mine have a new battle on their hands – convincing buyers to pay about $US3bn ($4.8bn) at a time when the coal price has fallen about 20 per cent since it was first set to hit the market.

In four months, the price of coking coal has declined about 25 per cent to $US188 a tonne on the back of weaker demand out of China, while the price of thermal coal is down about 18 per cent for the same period, at $US113.05 a tonne.

Adding to that has been the challenge of a stop to the longwall coal process last year, in which the mine shut down for about a fortnight.

Longwall mining is a form of underground coal mining whereby a long wall of coal is mined in a single slice and, when the mine is mature, as is the case with Kestrel, gas produced as part of the mining process can cause a small ignition, which can lead to a halt to mining until it is deemed safe to continue.

Obvious buyers are Yancoal, Whitehaven and a Stanmore Coal-led consortium. But Whitehaven is not a bidder, as it focuses instead on bedding down its Blackwater and Daunia coal mines, purchased from BHP for $5bn last year.

Bank of America and Macquarie Capital will be working on the sale of Kestrel for part owner EMR Capital.

Peabody Energy recently purchased Anglo American coal mines for $US3.8bn, seeing off other competitors including a Stanmore Coal-led consortium and Yancoal.

Yancoal is 62 per cent-owned by the Chinese state-owned Yankuang Energy.

Kestrel is the world’s largest underground coking coal mine, producing about 7.1 million tonnes of coal annually.

It is in Queensland’s Bowen Basin, 50km northeast of Emerald, and was purchased from Rio Tinto by the Owen Hegarty-chaired EMR Capital in 2018 for $US2.25bn.

EMR Capital owns 52 per cent.

Adaro Energy owns the remainder and has pre-emptive rights to buy out the asset.