Nov. 12 (Bloomberg) -- Coal India Ltd., the world’s largest coal producer, is considering a Massey Energy Co. mine for its first asset purchase in the U.S., three people with direct knowledge of the matter said.
The company, based in Kolkata, is currently researching the deposit, the people said yesterday, asking not to be identified because the information is confidential. Richmond, Virginia-based Massey rose to the highest in seven months in New York.
Mines overseas would help the state-run company meet demand from power stations and steel mills that’s rising faster than production in Asia’s second-biggest energy-consuming nation. Coal India, which held 380.5 billion rupees ($8.7 billion) in cash and bank deposits at the end of June, has set aside 60 billion rupees for acquisitions in the year ending March.
“Being a state-run company, they have a responsibility to meet this demand,” said Alex Mathews, head of research at Geojit BNP Paribas Financial Services Ltd. in Kochi, in India’s southern state of Kerala. “The timing is right now, as with recovering economies, prices of assets will only rise.”
Massey spokesman Jeff Gillenwater said in an e-mail the company doesn’t comment on merger and acquisition matters.
The stock rose 96 cents, or 2.1 percent, to $47.02 in New York Stock Exchange composite trading yesterday, the highest since April 6, and has gained 12 percent this year.
Coal India, which started trading Nov. 4 after selling shares in the country’s largest initial public offering, declined 2.6 percent to 320.15 rupees at the close in Mumbai trading, giving it a market value of $45 billion. The benchmark Sensitive Index fell 2.1 percent.
Coal India is studying three assets in the U.S., Australia and Indonesia, Chairman Partha Bhattacharyya said Oct. 25. Bhattacharyya couldn’t be reached on his mobile phone and finance director A.K. Sinha declined to comment immediately.
Massey shares surged 11 percent on Nov. 5 after the Wall Street Journal said the company is weighing a takeover offer from Alpha Natural Resources Inc. of Abingdon, Virginia.
The U.S. company, the largest coal producer in Central Appalachia, said in May it isn’t preparing itself for sale. Massey continues to have discussions with other producers to pursue joint ventures or asset sales, the company said in a May 26 statement.
Coal India is seeking to buy a mine from Massey and not the company, the people said. The transaction may be for less than $1 billion, two of the people said.
Massey owns the Upper Big Branch mine where 29 people died in April, the worst U.S. coal mining accident in 40 years. The company has a market value of $4.7 billion.
The coal producer owns 2.8 billion tons of reserves, 1.3 billion of which are metallurgical coal, used to produce steel. Benchmark prices for that grade of coal have soared to $209 a metric ton for the three-month contract ending Dec. 31, 62 percent higher than a year earlier.
India’s government sold a 10 percent stake in Coal India last month. The company acquired two coal blocks in Mozambique last year, which may hold a combined 1 billion tons of thermal coal and some coking coal.
The construction of new power plants and an expansion of India’s steel industry may triple coal imports from their 2007 level by 2030, the U.S. Energy Information Administration predicted last year. India may import almost 100 million tons of coal this year to meet growing demand for the fuel from power plants, Bhattacharyya said in May.
The country’s imports of coking coal, an ingredient in making steel, will triple by 2015, Citigroup Inc. analyst Alan Heap said at a conference Oct. 7.
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