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Japanese trading firms look to divest from Australian coal

World Coal,

Two Japanese trading houses are looking to sell their stakes in Australian coal assets, as low-commodity prices, high costs and a strong Australian dollar put pressure on the sector.

Itochu and Sumitomo have hired advisers to help them sell their combined 45% stakes in two coal mines in Queensland (Newlands and Collinsville), as well as their access to a berth at the Abbott Point coal terminal.

Daniel Morgan, an analyst at UBS, said: “It’s a buyer’s market out there, a large number of assets are on the block, and not too many buyers are in the market. Transactions have slowed, sellers need to realise its not 2011-12 any more, [and] lower their asking price in order to get a deal.”

Of the potential buyers for these coal assets, a number of industry analysts have singled out Sojitz. The trading house has the biggest share in importing thermal coal from Indonesia and Russia. The firm has already mentioned it has earmarked Australia as a destination for further expansion in the coal market (the company has a global equity share of coal production of 7.6 million tpa).

The Abbott Point terminal access, as well as the Newlands and Collinsville mines, are part of a joint venture (JV) project between the two Japanese trading houses and Glencore. Glencore owns 55% of the JV, while Itochu owns 35% and Sumitomo 10%.

The two coal mines have a combined coal production of around 9.2 million t – with Newlands producing 7 million t from its opencast and underground operations, and Collinsville 2.2 million t.

The Wall Street Journal has reported that Itochu has hired JPMorgan while Sumitomo has hired Rothschild to advise on the sales of their stakes in the assets.

Edited from various sources by Sam Dodson

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