Mercator to buy coal mine in Indonesia this fiscal

Mercator Lines, India’s second-largest shipping company which has diversified into coal mining, will buy a coal mine in Indonesia with more than 30 million tonne (mt) capacity within the current financial year.

The company plans to invest $100-150 million for the acquisition. The mine will be larger than Mercator’s existing coal mine in Mozambique which has a capacity of 10 mt.

“The company is very aggressively looking at a relatively bigger mine and sure to close the deal during this financial year. It is very bullish on its coal mining business in Indonesia,” said a Mercator Lines official.

Its coal production has increased from 0.3 million metric tonne (mmt) in fiscal 2009 to 0.7 mmt in fiscal 2010 from existing coal mines in Indonesia. At present, Mercator Lines has four coal mines—three in Indonesia and one in Mozambique. The Indonesian mines have reserves of up to 21 mt.

Analyst, too, are bullish on the company’s coal business. According to Antique Stock Broking’s research note, “The cyclicality in earnings is expected to reduce significantly with increased revenue from new seven-year offshore contract ($92,000 per day) starting in the third quarter of the current fiscal and growth in coal business.”