China backed coal miner Yancoal remains the favourite to win control of two of BHP’s Queensland coal mines after final bids landed last week.
The discussion in the market on Monday was that the $6.7bn Australian-listed Yancoal was still working hard on a transaction to buy the mines at the weekend.
There has been a suggestion that Yancoal was the only party among the final bidders to put forward a proposal for both the Daunia and Blackwater mines that are up for sale through investment bank Macquarie Capital.
While the sense is that Yancoal remains the party to beat, a question being asked is whether it requires approval from the Foreign Investment Review Board, and whether this may deter BHP when it comes to picking the winner.
It is understood that the $2.6bn Australian listed Stanmore Resources, which reported a 46 per cent lift in its half year net profit on Monday to $US340m, remains in contention, as does Whitehaven Coal, both thought to have put forward offers for one of the two individual assets.
However, the understanding is that Coronado Global Resources is out of the race, while there is also a question mark about Peabody Energy and BUMA.
When asked about the sale process for the coal mines, Stanmore did not comment on Monday, other than to say it considered inorganic growth opportunities.
Final bids landed for the assets on Wednesday, believed to value the combined offering at between $US3bn and $US5bn.
Yancoal is 62 per cent-owned by China’s state-owned Yankuang Energy Group, while the state-owned China Cinda Asset Management owns about 13.7 per cent of the group.
Its share price has almost doubled since the start of last year.
Whitehaven Coal is advised by UBS and Bank of America, while Yancoal is advised by RBC.
Whitehaven’s focus is Daunia, sources say.
The Daunia mine, southeast of Moranbah in Queensland’s Bowen Basin, produces metallurgical coal used for making steel, which banks are prepared to finance.
Thermal coal proves a challenge for groups securing funding amid concerns about fossil fuels and their impact on the environment, but not metallurgical coal.
Daunia is close to Whitehaven’s Winchester South mine project.
Blackwater is the larger, more valuable mine because it produces more coal, but because it produces thermal as well as metallurgical coal, obtaining bank funding is harder, and it has larger remediation liabilities.
They are two of nine metallurgical coal mines in Queensland’s Bowen Basin that are part of the joint venture, split 50-50 between BHP and Mitsubishi Development.
Elsewhere in resources, Strike Energy has managed to get a deal done to buy Talon Energy after talks were called off about a buyout in the past fortnight.
The main terms on the table in the earlier talks remain, where Strike will pay Talon shareholders 0.4828 shares for each Talon share and Talon will demerge its Mongolian asset.
The implied price of the transaction is 21.2c per share and Strike will own 89 per cent of the business.
Talon, advised by RBC and Sternship, will also receive a $6m funding facility from Strike.
Hedge funds like what they hear at Southern Cross
Triple M and Hit radio network owner Southern Cross Media Group may soon have some hedge funds on its share register.
More exposure to copper the prize for big miners
Moves by BHP and Rio Tinto to think about major transactions says a lot about their expectations for the country’s iron ore production.