2nd UPDATE: Posco, Kepco Bid For 2 Anglo Coal Assets -Sources

1st Jul 2010 07:22

(Adds details of companies' existing coal assets in Australia) By David Winning Of DOW JONES NEWSWIRES SYDNEY (Dow Jones)--A South Korean consortium of Posco (005490.SE) and Korea Electric Power Corp. (015760.SE), or Kepco, is bidding for two Australian coal assets being sold by Anglo American PLC (AAL.LN), people familiar with the matter said. Posco, the world's fourth-largest steelmaker by output, and state-run Kepco are bidding for the Bylong and Sutton Forest exploration assets in the Sydney Basin of New South Wales state, the people, who declined to be named, said. The move shows how North Asian steelmakers and power generators are continuing to bid aggressively for overseas coal assets that are close to infrastructure such as ports, and where mined volumes can be shipped home to meet booming demand. It also highlights that a 40% tax on mining profits proposed by Australia's governing Labor Party, and a sharp increase in the valuations of local coal assets over the past year, aren't deterring interest from buyers. "A consortium of Kepco and Posco is bidding for the coal assets," but the outcome of the auction isn't known yet, said a Seoul-based Kepco official, declining to be named. "We are looking at several opportunities for a stable supply of raw materials and this is one of them," Posco spokesman Choi Doo-jin said. A spokesman for Anglo American declined to comment. Bylong has total resources of 420 million metric tons of low-ash thermal coal--used for power generation--that could be extracted via open-cut and underground mines, according to a flyer for the sale issued by Anglo American earlier this year. Sutton Forest is a smaller asset with an estimated 115 million tons of coal, but is attractive because it could produce both metallurgical coal used in steelmaking as well as thermal coal. Both assets are relatively close to railways leading to export terminals on the coast--Sutton Forest is near Port Kembla and Bylong is within reach of the port of Newcastle. Anglo American is selling the assets because they don't form part of its growth plans in the short-to-medium term. The company's existing Australian coal mining operations aren't affected by its decision to sell exploration projects. Goldman Sachs JBWere is advising Anglo American on the sales process. How much Posco and Kepco are bidding for each asset, and other financial terms, aren't yet known. State-owned Korean energy companies, including Kepco, invested a combined $4.5 billion last year in overseas resources companies and energy development projects, bringing total spending over the past 10 years to $9.48 billion, South Korea's Ministry of Strategy and Finance said this week. These companies plan to expand investment this year to enhance the country's energy self-sufficiency, the ministry said, without providing a precise target. On Thursday, Korea's SK Group said it would spend $14 billion on growing its operations by 2020, including through the acquisition of natural resources overseas. Korean companies often form consortiums to bid for exploration assets in order to pool finance and share risk. Posco's self-sufficiency ratio of key raw materials, including coal, is currently around 20%, well below its bigger rival ArcelorMittal's (MT) 46%. It aims to raise the ratio to over 50% by 2014. Posco has already made several investments in Australian resources companies, including an 8.3% stake in Macarthur Coal Ltd. (MCC.AU), a stake of close to 20% in Sandfire Resources N.L. (SFR.AU) and a near-15% stake in Cockatoo Coal Ltd. (COK.AU). Kepco is also invested in Cockatoo Coal with a 3.3% stake, and its other Australian investments include a minority interest in the Moorlaben thermal coal mine operated by China's Yanzhou Coal Mining Co. (1171.HK). -By David Winning, Dow Jones Newswires; +61-2-82724688; [email protected] (Kyong-Ae Choi in Seoul contributed to this article) (END) Dow Jones Newswires July 01, 2010 02:22 ET (06:22 GMT)