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Coal India Ltd. in talks to acquire Australian coal mining firms for US$ 4 billion

World Coal,

Coal India Ltd. (CIL) is in talks to acquire two, as yet undisclosed, Australian mining firms. The estimated cost of the acquisition if over US$ 4 billion.

The move comes as part of CIL’s strategy to acquire international assets. The Indian State-owned company is currently looking to overcome domestic market mine start up delays and boost coal production.

India is currently facing a severe shortage of coal, which has prompted the government to consider increasing imports. CIL contributes around 85% of coal production in India.

CIL has already sent proposals to acquire majority stakes in these two Australian firms for US2 billion each to its foreign acquisition committee.

CIL expects the deal will allow the company to import up to 28 million tpa of high quality thermal coal.

A coal ministry senior official told The Economic Times that following the committee's approval, the proposals will be taken forward to the board and then CIL will be ready to acquire the assets.

"The entire process is likely to take at least three months because CIL will conduct a due diligence through its merchant bankers on the assets to make sure the return on investment is in stipulation with the government norms," he said.

The global decline in coal and iron ore prices has led several international assets to be put up for sale. Some companies, such as Patriot Coal in the US, have been forced to file for bankruptcy.

Thermal coal prices have declined, on average, by more than 25% since the beginning of 2013. This has prompted several mining companies to halt production, reduce output and lay off workers.

CIL spokesmen have said they consider the current market conditions the ideal time for the company to acquire overseas coal assets. CIL have currently received 32 proposals of sale from foreign coal mines this year.

CIL chairman, S Narsing Rao, told The Economic Times: "If we delay the process the assets offered to us may not be available after some time because these companies also have the compulsion of engaging with other parties for selling them."

Edited from various sources by Samuel Dodson.

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