Australia's MIM aims to boost coal assets

CNN's Geoff Hiscock, Asia business editor

SYDNEY, Australia (CNN) -- Australian miner MIM Holdings has moved to boost its coal business by offering $166 million for a 55 percent stake in the Moura open-cut coal mine in Queensland.

The stake is now held by Coal & Allied Industries, a unit of diversified resources group Rio Tinto.

The deal is conditional on the reaction of Japan's Mitsui & Co., which holds the other 45 percent of the Moura mine joint venture through its Mitsui Moura Investments.

It has a pre-emptive right to Coal & Allied's stake, and must decide within 60 days if it wants to move to full ownership.

It declined any immediate comment on its intentions.

Next phase of strategy

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MIM managing director Vince Gauci said in a statement Thursday that the planned acquisition marked the next phase of its coal strategy and would lift its coal production capacity by 18 percent to 19.5 million tonnes a year.

Moura, which produces about 5 million tonnes a year of coking and thermal coal, had earnings before interest, tax, depreciation and amortization of about $60 million last year.

MIM said it would pay for the acquisition by raising $141 million (A$275 million) of new equity, with the balance from cash reserves or existing credit facilities.

It said that if Mitsui used its pre-emptive right, MIM had "alternative plans" for the funds raised from the equity market. Initially, it would use the money to reduce debt.

Bought mine in 2001

Rio Tinto acquired 55 percent of the Moura mine when it bought the Peabody Group's Australian coal assets in January 2001.

Moura is in the southern part of Queensland's rich Bowen Basin coalfield, and is linked by rail to the port of Gladstone, 180 kilometers (110 miles) to the east.

Moura's output is exported to Japan, Korea and Taiwan under long-term contracts.

MIM shares were suspended Thursday morning ahead of the announcement. They last traded at A$1.38, close to a two-year closing high of A$1.45 set on May 22 last year.