Chinese firms want to buy coal assets overseas, but on the cheap

Sun Dec 1, 2013 3:59pm EST
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* Beijing's new environmental policies to boost demand for high-grade coal

* Companies wait for valuations to fall, see coal prices staying weak

* Tough to wean away China from coal, say consultants

By Sonali Paul

MELBOURNE, Dec 2 (Reuters) - Chinese companies are on the hunt to buy overseas coal mines as Beijing's switch to cleaner fuels stokes demand for higher-quality coal produced in countries such as Australia, according to people familiar with the firms' strategies.

A renewed appetite for acquisitions by the world's biggest coal consumer will be a big boost for miners who are trying to dispose of assets worth billions of dollars to boost shareholder returns.

These include Rio Tinto, which has put Australian and Mozambique coal operations on the block, and Linc Energy , which is selling its New Emerald Coal business.

The Chinese, however, are not rushing to buy. They see asset values coming under further pressure as coal prices remain depressed amid a supply glut that has already driven prices down about a third since 2011.

"We have clients who are interested in taking stakes in coal assets. But the view is the market's not going to get any better for two years. So why buy something today when it's going to be a lot cheaper in eight months' time," said Sam Farrands, a Hong Kong-based partner at law firm Minter Ellison.   Continued...