KOLKATA (miningweekly.com) – State run miner Coal India Limited (CIL) has identified coking coal and high-grade thermal coal assets in Australia for strategic investments and will be appointing merchant bankers to conduct financial due diligence of these targeted acquisitions.
CIL is looking at picking up equity stakes in coking coal and high-grade coking coal assets with enabling provisions of assured offtake of part of the production from the acquired assets for shipment back to India.
“CIL intends to avail the services of internationally reported merchant bankers, investment bankers to carry out financial due diligence and render transaction advisory services with respect to the acquisition of stakes along with offtake rights in coal assets in Australia held by a company for the purpose of arriving at an enterprise valuation of the company and framing non-binding offers initially, followed by a final and binding offer,” a CIL statement said.
“A tender is being floated for engagement of merchant banker, investment banker for assisting CIL in acquiring coal assets in Australia,” the statement added.
The State miner has renewed efforts to acquire global assets anticipating that domestic production of thermal coal will not be able to keep pace with rising demand from operational and planned new thermal power plants. At the same time, India's import dependency in coking coal is expected to rise exponentially against the backdrop of government’s target of 300-million tons of domestic steel making capacity by 2030 and limited Indian coking coal resources.
“In light of this, CIL intends to set up coking coal and high grade low ash thermal coal mining business overseas with a view to acquire coal resources, produce coal and import the produce back to India by way of either opening new mines abroad or equity participation in working mines on a production sharing participation interest basis,” the CIL statement said.
According to industry data, Indian coal imports increased 9% during 2018/19 to 164.21-million tons compared with the previous financial year. Meanwhile, coking coal imports during 2018/19 totalled 47.73-million tons, almost the same volume shipped in during the previous year.
The Power Ministry has estimated coal demand of domestic thermal power plants at 651-million tons during fiscal 2019/20 with CIL assuring thermal companies of supply of at least 530-million tons during the year.
Besides the supply gap, the State miner’s bulk production is high ash content thermal coal and thermal power plant operators are having to resort to high import volumes of high gross calorific value thermal coal for blending with domestic coal for their thermal plant boilers.