July 24, 2012 / 7:57 AM / 6 years ago

UPDATE 3-Anglo moves into Mozambique coal with $555 mln deal

* Anglo to buy Revuboe project stake for A$540 million

* To take 58.9 percent stake

* First major project in Mozambique for Anglo

* Concentrates big Mozambique projects in hands of majors

By Clara Ferreira-Marques

LONDON, July 24 (Reuters) - Anglo American has agreed to buy a majority stake in a coal project in Mozambique for $555 million, snapping up mining tycoon Ken Talbot’s share of the undeveloped Revuboe deposit to secure a foothold in a region emerging as a major producer.

Anglo has long coveted an asset in Mozambique, which is expected to become a key source of sought-after premium, hard coking coal, used in steelmaking. It has been reported for months to be in talks with the estate of the deceased mining magnate.

The London-listed miner said on Tuesday it had agreed to buy a 58.9 percent stake in the Minas de Revuboe project, a deposit sandwiched between a mine owned by Brazil’s Vale and a Rio Tinto project, for A$540 million in cash.

Talbot, one of Australia’s richest men, died in a plane crash with other mining executives in central Africa in 2010 and his estate has since been on the block. Talbot was the founder of Australia’s Macarthur Coal, bought by U.S. coal miner Peabody Energy last year, but largely sold out in 2008.

The remaining stakes in Revuboe, in Mozambique’s promising Moatize coal basin, are held by Nippon Steel, with just over 33 percent, and Korean steelmaker POSCO, with 7.8 percent. The project has a reported resource of 1.4 billion tonnes of hard coking and thermal coal suitable for open cut mining, and could support exports of between 6 and 9 million tonnes per year, most of which would be coking coal.

Analysts welcomed the deal in a country many see as having an attractive mining and tax regime and a prime location for shipping to Asia.

Several, though, said it was too early to judge the deal and its price tag, as Anglo has yet to give an indication of the cost of developing the project and some shareholders could express concerns over the infrastructure challenges in store. Anglo and partners will have to develop rail links or use barges to get the coal from Revuboe to seaborne markets.

Anglo has come under considerable scrutiny for cost overruns and delays at its major Minas Rio iron ore project in Brazil.

At current resource levels, the price of the stake in Revuboe is equivalent to $0.67 per resource tonne, broadly in line with other deals in the sector.

It is above the price paid by Rio for Mozambique-focused coal miner Riversdale, on a per tonne basis, but below the price paid by Anglo itself to buy out minorities in its Canadian Peace River Coal operations last year, analysts said, largely due to the fact production could still be four or more years away.

GOOD PRICE

“It looks like a good price per tonne. The price partially reflects this is more of a long-dated project,” analyst Jeff Largey at Macquarie said.

Anglo was among the suitors that considered buying Riversdale, eventually snapped up by Rio, but later professed it to be too expensive.

Tuesday’s purchase further concentrates major Mozambican projects in the hands of the world’s mining heavyweights, from Rio and Vale to London-listed Kazakh miner ENRC.

Most importantly for Anglo, however, the deal secures a significant project in one of its three growth commodities - the other two being iron ore and copper - and, at last, a presence in the third of the major coking coal producing regions, as the miner is already in Canada and Australia.

“Metallurgical, or specifically premium hard coking coal, is probably one of the few commodities where over the long term, structurally, there seems to be a lack of high-quality deposits, so from a strategic point of view I think it is a positive,” Macquarie’s Largey said.

“There is a lot of uncertainty as to development costs, capex, infrastructure, timeline, but Anglo has been very clear that they like met coal, and this looks like a sensible acquisition.”

Anglo has increasingly turned its focus from major deals to smaller, bolt-on acquisitions in key commodities. Last week the miner announced it had increased its stake in its Kumba Iron Ore subsidiary to just under 70 percent.

The Mozambique deal is due to close in the third quarter.

Anglo’s share price was largely unaffected by the deal, which is unlikely to have an immediate impact on the company’s valuation. The stock was up 0.4 percent at 1,955 pence, marginally above a flat UK mining sector at 1340 GMT.

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