The Rising Influence of Rising Affluence

[DewDiligence]

China, Australia Ink 30-Year Met-Coal Deal

[The company in question, Resourcehouse Ltd., is private but plans to IPO soon.]

http://online.wsj.com/article/SB20001424052748704829704575048522230607924.html

›Beijing Will Purchase Output and Help Finance $8 Billion Project in Australia

By RACHEL PANNETT
8-Feb-2010

CANBERRA, Australia—Resourcehouse Ltd. said it signed a US$60 billion, 20-year export contract with one of China's largest power companies, bringing a big coal mine closer to reality and underscoring the growing commercial relationship between Australia and China.

Australian billionaire Clive Palmer's closely held Resourcehouse, based in Brisbane, also said Saturday that Export-Import Bank of China agreed to lead debt financing for the project, contributing US$5.6 billion of the estimated US$8 billion development cost.

Mr. Palmer likely will contribute the remaining funds for the project, which he has named "China First," a spokesman said.

China Power International Development Ltd. agreed to buy 30 million tons of coal annually, at a cost of around US$3 billion a year, for 20 years [i.e. roughly $100 per ton], Resourcehouse said. The mine, in Australia's Queensland state, is slated to produce around 40 million tons a year starting in 2014.

Mr. Palmer hopes to break ground on the project in the second half of this year, subject to environmental and other government approvals, for which it has received fast-track status.

The agreement is broadly similar to several other energy import deals signed by China in the past year involving Export-Import Bank or China Development Bank, including crude oil-for-credit pacts signed with Russia, Kazakhstan and Brazil.

It underscores the growing commercial relationship between China and Australia—which has led to political tensions in the past year as Australian lawmakers grappled with China's growing appetite for the country's vast natural resources.

China is the world's largest producer and user of coal, and last year became a net importer of the fuel, which provides two-thirds of its energy needs. Australia already is the largest supplier of coal to China. Of the 125.8 million tons of coal imported by China last year, 43.9 million came from Australia.

Saturday's announcement paves the way for Mr. Palmer to resume an initial public offering process for Resourcehouse.

The mining magnate had planned to offer shares of the company on the Hong Kong stock exchange in a roughly US$2.5 billion IPO in November. But the process was delayed while Mr. Palmer discussed details of a deal with Metallurgical Corp. of China Ltd. to take a stake in Resourcehouse.

Metallurgical Corp. agreed Wednesday to buy US$200 million worth of shares. The Chinese company's investment is equivalent to as much as a 5% stake, although the actual holding will depend on Resourcehouse's IPO price. The IPO is expected for March.

Mr. Palmer also announced the terms Saturday of a US$8.01 billion engineering, procurement and construction contract with Metallurgical Corp. to build China First, located in Queensland's Galilee Basin. Metallurgical Corp. agreed last year to take a 10% stake in the project.

The mine will be linked to a new coal terminal by a new 300-mile rail line. The mine and associated infrastructure will create 6,000 jobs during construction and 1,500 during operation, Resourcehouse said.‹