The Chinese are continuing to stockpile raw materials, companies that produce them, and mineral rights all around the world.

They are fully aware that inflation is going to send prices of real goods through the roof, and we are heading into a long and strong bull market in tangible assets.

Yanzhou close to Australian coal deal

By Peter Smith in Sydney

Published: August 10 2009 07:47 | Last updated: August 10 2009 18:37

China’s Yanzhou Coal Mining is in advanced talks to buy Felix Resources in a cash takeover that is expected to value the Australian coal mining group at about A$3.7bn (US$3.1bn).

If the deal is agreed and cleared by regulators, it would be one of China’s largest foreign takeovers and the country’s biggest Australian deal to date.

Felix on Monday requested that its shares be suspended from trading pending the outcome of “negotiations regarding a potential change of control transaction”.

The shares, which had traded at less than A$5 this year, last traded at A$16.90. However, the Chinese group was understood to have pitched its offer at about A$19 a share, a person close to the situation said.

At that level, Felix would be worth A$3.7bn.

Reports in Australia of a bid closer to A$22 a share were wide of the mark, the person said, adding that a deal could be announced this week provided it did not hit last-minute hurdles.

Yanzhou has been interested in Felix since 2008. However, early talks broke down as the financial crisis deepened and commodity prices collapsed.

However, a rebound in commodity markets has led to a rerating in coal miners’ share prices, which have also been helped by an upturn in mergers and acquisitions activity.

Noble, the Hong Kong-based commodity supplier, this year won control of Australia’s Gloucester Coal when it agreed to pay A$460m for the 43 per cent of shares it did not already own.

Peabody Energy, the US coal miner, has recently made bullish comments about demand from India for thermal coal.

Yanzhou’s interest in Felix highlights China’s strategic interest in Australian resources.

A $19.5bn investment by Chinalco into Rio Tinto collapsed in June when the Anglo-Australian miner abandoned talks. Yet, approaches by other Chinese groups for Australian assets have been more successful.

Oz Minerals accepted an offer from Minmetals in June to purchase the company’s mining assets after the Chinese group raised its offer in a pre-emptive move to head off opposition.

Australia’s coal mining sector has attracted a number of other international companies, including Switzerland-based Xstrata, which bought Jubilee Mines for A$3.1bn in February 2008, while Luxembourg’s ArcelorMittal acquired 19.9 per cent of Macarthur Coal.

Felix is a coal mining and exploration company with projects in Queensland and New South Wales. It produces high-grade semi-soft coking and ­thermal coals.

Felix owns 15.4 per cent of the Newcastle Coal Infrastructure Group’s new terminal in the port city of the same name, which is one of the world’s biggest coal export terminals.

Yanzhou, which had its shares suspended in Hong Kong on Monday, could not be reached for comment.

Original Article

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