Adaro eyes $291 million from unit IPO to spin off coal arm
Adaro is spinning off the coal mining unit valued at $2.45 billion to focus on developing cleaner energy, with an aluminum smelter being built in Kalimantan.
The sale of three mine properties around Tumbler Ridge, British Columbia, nears completion following a rebound in the price of metallurgical coal.
West Virginia-based ERP Compliant Fuels is negotiating a deal to buy the mothballed Wolverine, Brule and Willow Creek mines. Officials with the company said the sale could close as soon as September 1. Company representatives were in Tumbler Ridge this week to examine the assets and meet with the local government.
If the deal goes through, the company has plans to immediately open the Brule mine and hire around 200 people, a source with the company said. This could be followed by the reopening of the Wolverine Mine in the spring of 2017, which would mean the hiring an additional 200 people. Reopening the Willow Creek mine is not within the company’s first year plans because although it has the highest quality coal out of the three mines, it is also the most expensive to extract.
ERP officials added that should the sale go through, they are “committed to hire local people to get the community here back to work.” The town of Tumbler Ridge has been reeling since the closure of its last coal mine in early 2015.
ERP is a subsidiary of Canuma Coal Resources Ltd., which owns mine properties in West Virginia and Alabama. It specializes in hard-coking (steelmaking) coal, like that found at the Wolverine Mine.
It also has a keen interest in the Pulverized Coal Injection (PCI) coal at the Brule mine.
The source says interest in the Tumbler Ridge mines is partly spurred by knowledge that steel mills in Asia are looking to diversify their coal import portfolios.
The partial rebound in coal price is also driving the potential sale.
“The price of met coal dropped for 10 straight quarters,” the source said. “The first quarter of this year was the bottom. The second quarter it started coming up a little bit and now, the third quarter it has come up significantly.”
The benchmark price for met coal in the fourth quarter will be set next week and is expected to be “significantly higher” than the third quarter of 2016.
