Indian Hunt for South Africa's Junior Coal Miners Heats Up

Source: Reuters, Jackie Cowhig  (3/9/10)

As India's demand for coal increases, end-users have stepped up their hunt for South African junior coal mines in a bid to secure supply from this year if possible.


Indian steam coal end-users have stepped up their hunt for South African junior coal mines in a bid to secure supply from this year if possible. But attractive assets are scarce, would-be buyers said on Monday.

Because India's demand for coal is set to double in the next few years, these buyers' desire to acquire mine assets has become more urgent. The reliable delivery, relatively high energy-content and low ash content of South African coal have made it a preferred choice of many Indian end-users. Having become accustomed to the quality of South African coal but often squeezed by strong international prices, Indian end-users have decided to enter mining.

"We are looking at every South African coal company of a small to medium size but we want mines with good rail logistics and costs," the end-user said, in an office filled with maps and presentations on the South African coal industry.

It's a good time to make a move into South African mining because several junior producers are either up for sale or welcoming offers, South African industry sources said. However, it won't be simple for Indian firms to buy these mines. Many mines have pre-emptive rights attached, giving other shareholders first right to purchase. Others are likely to be sold to companies with a connection to the seller. Still others are over-valued despite having good logistics, industry sources said.

Several Indian companies have opened offices in Johannesburg to try and accelerate the purchase of coal assets and more are likely to do so.