Moolarben the drawcard in Yancoal IPO

CHINESE coal mining giant Yanzhou Coal is reportedly ready to raise $1 billion for its local Yancoal subsidiary on the Australian Securities Exchange by the end of the year after walking away from an acquisition of Whitehaven Coal.
Moolarben the drawcard in Yancoal IPO Moolarben the drawcard in Yancoal IPO Moolarben the drawcard in Yancoal IPO Moolarben the drawcard in Yancoal IPO Moolarben the drawcard in Yancoal IPO

Moolarben coal, image courtesy of Yancoal Australia.

Lou Caruana

The company would sell approximately a third of Yancoal, which owns the Moolarben and Austar mines in New South Wales, through an initial public offering, according to Bloomberg.

Investor relations manager of Brisbane-based Yancoal Australia Ian McAleese told Bloomberg it has a “strategy to be IPO ready by the end of 2011”

“We would like to have our prospectus ready to be able to take advantage of market conditions,” he said.

“The preferred way to do this is to sell more stock than 30 per cent of the total value.”

Yanzhou, which paid $3.1 billion for Felix Resources in 2009, now operates a total of four mines in Australia and reported a net income of $415 million last year.

In gaining FIRB approval to acquire Felix, Yanzhou agreed to float Yancoal on the Australian Securities Exchange by the end of 2012 and to own less than 70% of the company at that time.

The company would be seeking higher IPO valuation than what it paid for Felix because the Moorlarben mine has begun production of thermal coal and the Austar mine continues to produce coking coal.

“[Yanzhou] expects a higher valuation now because the Austar mine will be included in the listing, while Moorlarben is now up and running,” McAleese said.

“FIRB has been receptive to the changing business environment affecting Yancoal.”

While the Moolarben open cut coal mine still requires state government approval to develop longwall panels under second-stage mining plans, Yancoal has already started initial work to head underground.

Yanzhou also detailed progress with the proposed expansion of the Yarrabee open cut mine in Central Queensland to 3 million tonnes per annum in its recent annual report.

“The preparatory works for the expansion project of Yarrabee coal mine as well as the preliminary works for Moolarben underground coal mine are underway,” Yanzhou chairman Li Weimin said.

The Upper Hunter Valley mine hit 12Mtpa of capacity, according to the Chinese parent company.

However, development also resulted in a $70,000 fine and $55,000 of court costs for Yancoal last year when it was found to have unlawfully cleared sensitive vegetation near Ulan.

The chairman said in the annual report that the IPO would provide a greater pool of capital which could also accelerate the adoption of longwall-top coal caving.

This Chinese-developed mining method is only used at one Australian operation, the Austar mine near Cessnock.

“Direct financing channels in different currencies are available by taking advantages of the listing platform, thus providing direct financing at low cost,” he said.

“By speeding up the capitalisation of fully mechanised top coal-caving technique, and achieving production targets with the use of technology and intellectual properties, overall efficiency will be increased.”

Yancoal also owns a 15.4% interest in the Newcastle Coal Infrastructure Group export terminal at Newcastle, entitling the company to export capacity under ship or pay contracts.