Brazil’s mining group Vale is looking to sell its 3 million tonnes a year Colombian coal operations, potential buyers told Reuters.
Colombia, the world’s no. 4 coal exporter, is dominated by three large producers. Smaller operators complain new properties are hard to come by, especially in areas where big players work and which are closer to Caribbean ports.
Vale is selling its Colombian assets because they are relatively small and high-cost mines versus the large operations of Cerrejon, Drummond and Glencore and they are not core assets for Vale’s business, the potential buyers said.
One source said: “They’re (Vale) selling — the mine doesn’t fit with Vale-type operations, they’re used to huge, low-cost iron ore mines.”
In 2009, Vale completed acquisition of some coal assets in Colombia for $306 million (190 million pounds), including El Hatillo coal mine, the Cerro Largo deposit, a minority stake in a consortium that operates a railroad, and a port concession on the Caribbean.
Vale’s operations are near to producers Glencore and Drummond in the northern Cesar province. U.S. miner Drummond sold 20 percent of its operations to Japan’s Itochu Corp for $1.5 billion earlier this year.
Vale has appointed a banker, and the process began more than a month ago, the sources said.
A Vale spokeswoman said the company does not comment on rumors.
Traders seeking to become vertically-integrated with their own mine assets could be among the most interested buyers.
“I’m not surprised at all. Vale is focussing on met coal and all the developments are focused on Asia … the property of Vale in Colombia is not geologically speaking in the best condition. It’s not bad, but it’s not Drummond,” said an expert with a major global research group specialized in mining.
“The coal quality is okay. The problem there is that the slope gets deeper as they develop the mine. That means a larger stripping ratio,” said the analyst, who is not authorized to speak to the media.
At October’s Coaltrans conference, the biggest annual coal gathering, several big energy traders who recently entered the coal market said they were looking actively to buy mines.
Analysts at the conference predicted that 2012 would see coal M&A activity driven more by traders and trading utilities, and less by end-users seeking security of supply.