May 30, 2012 / 5:17 AM / 5 years ago

Peabody Australia mine attracts Asian interest

SEOUL/BANGKOK (Reuters) - Coal miner Peabody Energy Corp (BTU.N) has attracted a bid from South Korean trader LG International (001120.KS) for its Wilkie Creek mine in Australia, which is valued at around $500 million, but may not draw as many bids as it had hoped for.

Peabody decided late last year to sell the mine as it aimed to focus instead on the assets it acquired with its $5 billion takeover of Macarthur Coal in Australia last year. UBS UBSN.VX is advising Peabody on the sale.

Thailand’s top energy firm PTT Pcl (PTT.BK) said on Wednesday it had expressed interest in the Wilkie Creek mine but pulled out of the process after reviewing the asset.

“After studying the information, we are not interested in that because we think it does not suit us,” Chitrapongse Kwangsukstith, chairman of PTT International Co Ltd, told Reuters.

LG has put in a bid, a spokesman in Seoul said earlier in the day.

There has also been some interest from Japanese companies, a source close to the transaction said, declining to be named as the process is confidential.

“Suffice it to say, there has been very strong interest,” Peabody Chief Executive Gregory Boyce told analysts in April following the release of the company’s quarterly earnings.

Boyce said the Wilkie Creek mine, which produces 2.5 million metric tons (2.75 million tons) a year of coal used in power stations on the Pacific Rim, has the potential to grow based on planned port and rail improvements out of the Surat Basin in Queensland.

PRICES UNDER PRESSURE

The sale is taking place in a tough environment, with thermal coal prices down more than 25 percent this year, partly due to exports coming to Asia from non-traditional sources like Colombia, South Africa and the United States.

Australia’s Newcastle spot coal index was at$92.88 as of Friday.

Asian prices have come under pressure as U.S. coal producers have been boosting exports due to a slump in demand from domestic power stations, which have switched to burning natural gas, thanks to abundant, cheap new supplies of shale gas.

At the same time operating costs at Australian coal mines have shot up, mostly due to labor shortages, rising fuel and energy costs, and face additional costs from a carbon tax from July 1.

Australian conglomerate Wesfarmers (WES.AX) said on Wednesday underlying cash costs at its Curragh coal mine had increased by 30 to 35 percent in the past two years.

Reporting by Miyoung Kim, Pisit Changplayngam and Narayanan Somasundaram; Writing by Sonali Paul; Editing by Muralikumar Anantharaman

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