13 August 2009

China aims to buy Australian coal company

It is a touchy time for a Chinese company to be buying Australian coal assets what with China accusing Aussi mining firm Rio Tinto of industrial spying.

However, Yanshou Coal of China is doing just that. The company has reached a deal to buy the Australian coal miner Felix Resources in a deal worth as much as $3.3 billion (4 billion AUD).

The takeover deal comes with asset valuations rebounding after the rout of last year and despite Rio Tinto’s decision to abandon a $19.5 billion deal with the Chinese state-owned company Chinalco earlier this year.

Still, the takeover by state-owned Yanzhou, one of the top Chinese coal producers, could face political opposition in Australia because of the spying situation. Should the deal happen, it would be China’s largest acquisition in Australia ever.

Chinese imports of coal more than doubled to about 48 million tons in the first half of the year to meet growing demand for steel and power production. Felix produced 4.8 million tons of coal through June.

Analysts and bankers expect Chinese companies to pursue Australian resource firms further to secure their supplies of natural resources.

For related information, go to www.isa.org/productivity.