Coal news and updates

Debt-laden Lanco Infratech Ltd is scaling down its proposed coal mining-cum-infrastructure project in Australia, as the race for overseas assets in the last few years across India’s minerals sector runs aground owing to falling commodity prices and rising debt.

The proposal for the development of Lanco Resources Australia Pty Ltd’s Bunbury Port Berth 14 at the Bunbury Port Inner Harbour was withdrawn, according to a 1 May notice on the Australian government’s environment department website.

This comes in the backdrop of Lanco Infratech scouting for buyers for its Griffin coal mine, which it purchased for $665 million (around Rs.4,000 crore today) in 2011. Its earlier attempts to reduce debt by selling assets have met with muted response.

Signs of distress at Indian firms that bought overseas mines during the rally in mineral prices that peaked in 2011-12 have become common. They are looking to get bailed out by other, cash-rich companies, or are waiting for a turnaround in commodity prices to rescue them.

Lanco Resources Australia, through its subsidiary Griffin Coal Mining Co. Pty Ltd, proposed to develop Berth 14A and coal storage and loading facilities at the Bunbury Port Inner Harbour, with the aim of exporting coal from the Collie Basin in the country.

A Lanco spokesperson declined to comment.

“We have been saying that this was inevitable, given Griffin Coal is losing money at the earnings before interest, tax and depreciation level and given the perilous financial state of the parent company,” said Tim Buckley, director of energy finance studies (Australasia) at the Institute for Energy Economics and Financial Analysis, a think tank in Australia.

Lanco Infratech’s Australia coal mine plans have been hurt by a fall in coal prices globally and a fall in electricity generation in India due to weak finances of the state electricity boards. The power sector is the biggest consumer of coal in India, absorbing 78% of local production.

“I wouldn’t be surprised if they can’t develop the port,” said Dhananjay Sinha, head of institutional equity research at Emkay Global Financial Services Ltd. “It is fairly obvious that they are finding it difficult to run the coal mine in Australia. Their plight is also connected to their fortunes at home.”

Coal prices are down for the third straight year. On Monday, thermal coal with 6300 kilocalorie was quoted around $96 per tonne with freight, down over 17% from a year ago, according to data from natural resources website OreTeam. In 2012, the same grade of coal was quoted at $124 per tonne.

Lanco also underwent a corporate debt restructuring. In December, the company’s bankers approved a proposal to restructure a total of Rs.7,700 crore of its debt, allowing the power generator a two-year interest holiday.

 

In the fiscal year ended March 2013, Lanco’s net debt was Rs.33,606.12 crore, up 12.13% from Rs.29,971.38 crore a year ago.

The company posted a net loss of Rs.529.68 crore in the quarter ended 31 December, against a net loss of Rs.464.64 crore in the same period a year ago. Revenue was Rs.2,501.66 crore in the December quarter, down 32.3% from Rs.3,696.63 crore in the same period in the previous year.

Lanco Infratech, which has 16 operating group firms, produces power, mines coal and builds roads. It wants to sell some assets to pare debt and fund other businesses. High fuel costs and low capacity utilization have increased its financial stress.

Shares of Lanco Infratech on Monday shed 2.43% to end at Rs.7.24 each on BSE. The exchange’s benchmark Sensex closed at 22,445.12 points, up 0.18%. The BSE Capital Goods index ended at 12,011.27 points, up 0.91%.

 

Source: http://www.livemint.com/