Macarthur Coal in coal industry consolidation move

Macarthur Coal Ltd, has announced a number of acquisitions that would make the company the leading independent Australian coal producer with pro forma 2009 sale volumes of 7.5 million t. The acquisitions include the following:

• An intention to acquire 100% of Gloucester Coal Ltd through an offmarket takeover offer valuing Gloucester at AU$ 8.1/share (scrip offer with cash alternative)

• An intention to acquire Noble Group Ltd interest in the Middlemount JV, taking Macarthur’s ownership to 100% including all marketing rights for Middlemount product

• It is continuing discussions with Noble to acquire a majority stake (currently expected to be 79.9% subject to further negotiations) in Donaldson Coal Holdings Ltd.

On completion of the proposed transactions, Macarthur will have a market capitalisation of approximately AU$ 3.4 billion. Key features of the new company would include the following:

• Six operating mines in two states currently shipping through two coal terminals.

• Growth potential supported by future port capacity allocations at Abbot Point and Newcastle Coal Infrastructure Group (NCIG).

• Substantial reserve and resource base to support development, with upside potential, including an advanced development project in Middlemount.

• Geographic, mine, product and port diversification with new operations in the Gloucester Basin and Newcastle coalfields to complement existing operations in the Bowen Basin.

• Significant additional product diversification with the addition of Gloucester’s coking coal and Donaldson’s thermal coal to Macarthur’s existing leading PCI portfolio.

• Significant development opportunities with large tenement portfolio.

• Experienced board and management team, including the addition of highly experienced coal industry executives from Gloucester and Donaldson.

Rationale for the Gloucester offer and the Noble transactions

Macarthur will be a leading player in the Australian coal sector: after the transactions Macarthur will have an equity market value of approximately AU$ 3.4 billion and will have a significantly increased production profile with pro forma 2009A sale volumes of 7.5 million t.

Substantial resources and reserves base – the merged entity will have pro forma attributable reserves and resources (excluding reserves) of 316.5 million t and 1.8 billion t respectively to support development. The merged entity will also have considerable upside potential through the combination of Macarthur’s and Gloucester’s extensive exploration tenements

Geographic, mine, product and port diversification: the merged entity provides both Macarthur and Gloucester shareholders with greater geographical, mine and port diversification, which will enhance the flexibility to diversify risk and optimise production and sales. The merged entity will also have significantly greater product diversification with pro forma 2009A sale volumes of 44% LV PCI, 8% export coking, 47% export thermal coal and 1% domestic thermal coal.

Significant development pipeline: the merged entity has a significant portfolio of growth projects, which will continue to underpin the estimated strong production growth. Assets in the development stage include Middlemount in the Bowen Basin and the Abel expansion in the Newcastle coalfield.

Required infrastructure allocation in place: through the acquisition of Donaldson, with NCIG port capacity entitlements and Macarthur’s expected allocation at Abbot Point, the merged entity will have the required port infrastructure in place to underpin the growth profile of both existing and development assets.

Read the article online at: https://www.worldcoal.com/coal/22122009/macarthur_coal_in_coal_industry_consolidation_move/