Private equity’s push into the Australian coal sector has continued as Denham Capital takes control of some of Peabody Energy’s best undeveloped acreage and hints it may buy more of the struggling coal miner’s Australian business.
Peabody sold the tenements in Queensland’s Bowen Basin to little-known Pembroke Resources, which was only registered as a company in Australia in April 2014.
Denham is behind Pembroke, and the move comes after fellow resources-focused fund manager Taurus Funds Management bought Anglo American’s Foxleigh coal mine last month.
The coking coal tenements were sold for $104 million and included royalty streams.
Some of the tenements, such as Olive Downs, were previously held by Macarthur Coal, which was bought by Peabody for close to $US5 billion in 2012.
Several former Macarthur Coal team members are working for Pembroke, including exploration director Attila Kovago. Pembroke is led by former Gloucester Coal managing director Barry Tudor.
It was under Mr Tudor’s leadership that Gloucester Coal was taken over by Yancoal for $US2 billion in 2012. But Mr Tudor declined to discuss the purchase on Tuesday.
In a statement, Pembroke hinted that more coal acquisitions could be made, and the company was now shaping up as a likely buyer of some of Peabody’s developed coal mines in Queensland.
“Pembroke will continue to assess other acquisition and development opportunities as it seeks to further build out its portfolio of high-quality metallurgical coal assets,” the company said in a statement.
Aside from Pembroke, Denham has scores of subsidiaries that target different types of natural resources, particularly energy.
The sale continues a recent trend that has had large multinational miners sell Australian coal assets to companies that are not traditional miners.
The Australian coal sector is increasingly typified by small, entrepreneurial operators, many of which are private companies that are trying to turn around the mines that the majors could not make profitable amid weak coal prices.
But while many of the company names are new, those behind them are many of the Australian coal industry’s biggest names, as Mr Tudor’s involvement in Pembroke suggests.
Edek Choros, who delivered Millennium Coal into the hands of Excel Coal (later taken over by Peabody) is back on the scene with Batchfire Resources, which agreed to buy Anglo American’s Callide mine in January.
Bankrupt former billionaire Nathan Tinkler has also dabbled in the coal scene, leading Australian Pacific Coal’s purchase of Anglo American’s Dartbrook mine before standing down from his duties in March.
Veteran mining analyst Mike Harrowell said a lack of investment in future coal reserves was making it a good time to buy coal assets.
“This is a fabulous time to put a project in place,” he said. “If you read the papers, there is no reason to buy coal, but the fact is coal is going to continue powering much of the world until nuclear takes over.
“We have a very low-risk environment for starting a coal project. There is some serious under-investment now starting to occur.
“The current round of entrepreneurs will get their port capacity much cheaper than companies did during the boom. There is plenty of port capacity around.”
While Peabody has been able to sell the former Macarthur acreage, its attempts to sell the Wilkie Creek coal mine in Queensland have failed.
A subsidiary of clean coal aspirant Exergen agreed to buy Wilkie Creek in July 2015, but Peabody recently confirmed the sale process had been terminated. It is believed Exergen was not able to find the money to complete the transaction.
Wilkie is the second Australian coal mine sale that has been announced but has failed to reach completion; Rio Tinto has tried on several occasions to sell the Blair Athol mine, including to Linc Energy, but the deal has never been completed.
Meanwhile, Korean steel maker POSCO was dealt a blow in the NSW Land and Environment Court on Tuesday when the court overturned its permission to conduct exploration drilling on private properties in the Southern Highlands.
The drilling was intended to support POSCO’s plans to build a coal mine in the Southern Highlands under the banner of Hume Coal.
Hume Coal said the ruling would not interrupt plans to submit an environmental impact statement to the government before the end of the year.