Billionaire Salim to Buy Rio's Coal Assets for $224 Millionby
MACH Energy acquires Mount Pleasant coal project in Australia
Deal brings Rio asset sales to $4.7 billion over three years
A company run by Indonesian billionaire Anthoni Salim agreed to buy Australian coal assets from Rio Tinto Group for $224 million, expanding in an industry suffering from a global glut and plunging prices.
The sale of the Mount Pleasant coal project in New South Wales to MACH Energy Australia Pty also includes potential royalties in the future, Rio said on Wednesday. The deal follows Rio’s agreement last year to sell a stake in the Bengalla coal venture in Australia to New Hope Corp. for $606 million and brings its asset sales to $4.7 billion over the past three years.
Salim’s company is buying the coal operations as prices languish at the lowest levels since 2006 and demand slows in China, the biggest consumer. The price of thermal coal at Australia’s port of Newcastle has tumbled to about $48 a metric ton after five years of declines, according to data from Globalcoal.
MACH “must be of the view that demand is going to grow,” Mathew Hodge, a Sydney-based analyst at Morningstar Inc., said by phone. “You’re going to be waiting for a long time” for coal investments to pay off, he said.
Investors, policy makers and producers are weighing the future of coal and considering the prospect that undeveloped deposits may become stranded assets as nations take steps to reduce their greenhouse-gas emissions.
Despite the travails of the sector, Australia is forecast to overtake Indonesia and regain its position as the world’s largest coal exporter, according to the International Energy Agency. India, Malaysia and Vietnam may help drive demand for Australian coal, consulting firm CRU Group said earlier this month.
Perth-based MACH is owned by Droxford International Ltd., which is part of Indonesia’s Salim Group, according to its website. MACH expects first coal production at Mount Pleasant in late 2017 and is targeting power-station coal customers in Asia. The deal is expected to close in the second quarter.
Salim controls First Pacific Co., a Hong Kong-based conglomerate with interests ranging from noodle maker PT Indofood Sukses Makmur to Philippine Long Distance Telephone Co. He has a net worth of about $4.2 billion, according to the Bloomberg Billionaires Index.
Rio, the world’s second-biggest mining company, last year dismantled its energy division, responsible for coal and uranium assets, in a restructuring seen at the time by Jefferies LLC as signaling a potential exit from coal.