An Australian mining sector report, undertaken by UBS, has revealed an FDI increase in mining projects in the country with about $7 billion of Coal assets alone being held by foreign companies. According to the report, the number of mergers and acquisitions in the Australian mining sector has increased by a notable margin as foreign companies push for Coal investments in the country.
The report revealed further that most of the country’s coal assets are being increasingly taken over by Asian companies desperate to cater for the burgeoning energy demands in their countries and subsequently; the rush for Australian coal assets has upped bid valuations for Australian mining companies.
In a nut shell, the mining sector in Australia has seen some major offers from companies in India and Thailand, notably the offer for the purchase of Macarthur Coal by Peabody Energy that was later absconded, Thailand Company, Banpu, made an offer of $2 billion for the acquisition of Centennial Coal Co. and without forgetting the rumored offer made by Indian company, Adani Enterprises for the acquisition of Linc Energy. These are just some of the latest offers from foreign companies for Australian miners, according to the report.
In essence, over $3 billion worth of foreign investments in the mining sector have been undertaken in less than one week after the tax crisis, started by former Prime Minister, Kevin Rudd was quelled by the incumbent Prime Minister, Julia Gillard. Most analysts believed the proposed new taxes that were abandoned by Gillard would have crippled the mining industry, at its 40% cut on mining profits.
The report notes that the country has always been a favorite for Chinese resource investors. Country’s such as India are now getting most of their coal supplies from Australia and if the trend keeps pace, Australia may as well become one of the single biggest suppliers of thermal Coal to India.
Analysts expect India’s rapid economic growth and expansion to open up a deficit in supply of about 100 million tons of coal between demand and supply, something Australian miners could take advantage of and increase her FDI in the coal industry. As it is currently, coal prices have doubled from their prices in 2005, marking an increase in demand from areas that have rapidly growing economies necessitating the need for more steel to develop cities and extra power to heat and light up those cities.
26 July 2010.