Coal India in talks to buy Indonesia mines

Coal India, the world's largest coal producer, may submit a final bid by the end of June to buy a stake in Indonesia's PT Golden Energy Mines, a person with direct knowledge of the matter said. 

The state-run coal monopoly is currently doing due diligence of Golden Energy, said the person who declined to be named.

"It is not a controlling stake," the person said, and didn't provide more details. He said Coal India is yet to decide on a valuation for the stake it plans to purchase as a proposal is yet to be placed before the company's board. 

"There are various proposals in countries like Indonesia, Australia, U.S., which Coal India keeps on evaluating," the person said. 

Coal India, which contributes to more than 80% of the country's coal needs, faces several obstacles in augmenting its output such as delays in environment clearances. To meet rising demand from consumers, mainly in the power sector, the company has been scouting for mining assets overseas. More than half of India's power-generation capacity of 174.36 gigawatts is based on thermal coal. The country aims to add 163 GW of capacity in the decade through March 2017 and a major portion of the new capacity would also be dependent on fossil fuel. 

India, the world's second-fastest growing economy in the world, faces shortage of coal as environmental concerns have delayed approvals for local mining, hurting production. The country is facing a shortage of 142 million tons of coal for the current year. Local production of coal is expected to be 554 million tons against demand for 696 million tons, according to government estimates. 

PT Golden Energy is a wholly owned unit of Jakarta-based Dian Swastatika Sentosa, and is estimated to have a total coal resource of 1.2 billion tons across its 10 mining concessions in regions including South Sumatra, Central Kalimantan and South Kalimantan. 

Golden Energy exports coal to countries such as India and China and its client base includes Sumitomo Corp., Glencore and Ace Trading, according to its Web site. The company's current production capacity stands at about 10 million tons. 

The Indian company also is working on plans to import coal under long-term arrangement from global companies.

"If this deal is done, Coal India will get assured supply of coal to India from the Indonesian company," the person said.

The person also said Coal India is still evaluating a proposal to buy up to a 15% stake in U.S.-based coal producer Peabody Energy Corp.'s Wilkie Creek mine in Australia. Another person had said, previously, Coal India may buy the stake in the Australian mine for $120 million. Source: Wall Street Journal