Vale will argue that the report prepared by Aquila’s independent valuer did not meet the FMV requirements detailed in the Belvedere joint venture agreement.
“Our view simply is that it is not a valuation report on the fair market value as is required in the situation and that the process cannot continue – and so a determining valuer cannot be appointed – until this issue is resolved,” Vale global coal managing director Decio Amaral said.
Aquila said its subsidiary BD Coal nominated an international investment bank “ranked amongst the top 10 investment banks globally on the basis of transactions worldwide in the mining sector over the past two years” to determine the value of the project stake.
BD Coal viewed Vale’s assertions as essentially “differences of professional opinion on matters of valuation”.
Amaral responded this morning.
“In our opinion, it is not a matter of a difference of professional opinion when the process for preparing that report is breached – this is a legal question and not something that can be decided by an investment bank.
“We asked Aquila to instruct their valuer to complete a further valuation in accordance with the terms of the joint venture agreement, but Aquila didn't agree as they believe that their report was in accordance with the joint venture agreement and so we believe a court must now decide this issue.
“It is unfortunate that we have had to commence litigation against Aquila on this matter as we had hoped to complete the deal soon.”
Both Vale and Aquila came up with values of the 24.5% stake in the Belvedere project which differed by more than 10%.
Back in June, Vale acquired private resources company AMCI’s 24.5% stake in the project for $US92 million, and the Brazilian miner was hoping for a similar deal with Aquila.
But $92 million could be considered undervalued, especially when considering that Aston Resources paid $A480 million cash for the less advanced Maules Creek project in the Gunnedah Basin of New South Wales.
A consortium comprising Korea Electric Power Corporation, steelmaker POSCO and Cockatoo Coal also inked an agreement to pay Anglo American Metallurgical Coal $580 million in cash for five undeveloped Australian coal leases.
Belvedere is a hard coking coal project located in the southern Bowen Basin and holds 3.87 billion tonnes of resources, including 1.53Bt indicated and 2.34Bt inferred.
The prefeasibility study in March confirmed the viability of a 3.5Mtpa coking coal operation, which will increase to 7Mtpa with a second longwall in 2020.
Construction could start up in 2014, with first coal mined in 2016 and the first longwall installed in 2017.
Aquila is already seeking damages from Vale for the expected income from longwall mining at Eagle Downs from 2013 as the Brazilian giant would not agree to the planned port capacity at Abbot Point early this year.
Vale owns 75.5% of the Belvedere project and is a 50:50 JV partner with Aquila for the Isaac Plains mine and the Eagle Downs project in Queensland.