Apollo Said Close to Deal for Anglo’s Australian Coal Mines

  • Agreement may ultimately value mines at more than $1.5 billion
  • Buyout firm, Xcoal beat BHP, Coronado for Australian mines

Apollo Global Management LLC and Xcoal Energy & Resources LLC are poised to buy Anglo American Plc’s Australian metallurgical coal assets, after beating out competition from rivals including BHP Billiton Ltd., people with knowledge of the matter said.

The deal may ultimately value the assets at more than $1.5 billion, said the people, who asked not to be identified because the details are private. The agreement to buy the Moranbah and Grosvenor mines in Queensland includes a so-called contingent value right, which could entitle Anglo to further payments depending on the future price of coking coal, the people said.

London-based Anglo extended final negotiations after the price of coking coal, used to make steel, more than doubled this year, the people said. No final decisions have been made and the deal may still fall apart. A spokesman for Anglo declined to comment. A representative for Apollo didn’t immediately return requests for comment, while a representative for Xcoal wasn’t immediately available to comment.

Anglo Chief Executive Officer Mark Cutifani, seeking to reshape its business for an era of lower commodities prices and to cut net debt to less than $10 billion, plans to exit coal and iron ore to focus on more profitable diamond, platinum and copper mines. The company is targeting $3 billion to $4 billion in asset sales this year. In April, it agreed to sell its Brazilian niobium and phosphates business for $1.5 billion after also striking deals to offload interests in Australian coal mines including Foxleigh, Callide and Dartbrook.

Coal Prices

Anemka Resources, the mining investor backed by Warburg Pincus, Coronado Coal LLC and AMCI Capital LP had earlier bid for the assets, people familiar with the matter said in July.

Anglo shares fell 4.8 percent to close at 990.60 pence in London Thursday. The stock has gained 231 percent this year.

Spot prices for coking coal have more than doubled since June as China cut capacity due to flooding in Shanxi province, spurring a boost in the nation’s imports. Peabody Energy Corp., the U.S. producer, scored the highest contract price for selling metallurgical coal in four years through an agreement this week with Japanese steelmaker Nippon Steel & Sumitomo Metal Corp.

Anglo American owns 88 percent of the Moranbah North mine, located in Queensland’s Bowen Basin and has annual output of 4 million metric tons of coking coal, according to the company’s website. The nearby Grosvenor project delivered its first coal seven months ahead of schedule, the company said in May.

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