Lanco bags Australian coal miner Griffin

As part of its strategy to secure coal supplies for meeting its needs in expanding power generation capacities, infrastructure major Lanco Infratech is all set to acquire Griffin Coal Mining Co, owner of thermal coal mines in Western Australia.

Lanco Resources Australia, a step-down subsidiary of Lanco, has entered into an agreement with Griffin to acquire 100% of the latter’s equity. Though the value of the agreement has not been
disclosed, sources said that the deal would be between $400 million and $500 million.

“We hope the entire acquisition process would be completed in a couple of months. The valuations of the deal would be disclosed at that point,” Lanco CFO Suresh Kumar told DNA.

Lanco’s success in acquiring the company came amid competition from other industry majors, including GVK from India and three other firms from Japan and China.

“We plan to tap opportunities for the coal market in Australia by selling a part of the coal mined there and also bring the coal to India for meeting our own needs in Lanco’s power plants,” Kumar said.

Kumar said the company would meet the cost of acquisition through a bridge loan initially and then convert the debt into a long-term finance.

The Griffin mine, based out of Collie in Western Australia, currently produces over 4 million tonnes of coal per annum (mtpa). The mining tenements contain over 1.1 billion tonnes of thermal coal resources; production capacity can be ramped up to more than 15 mtpa once the evacuation infrastructure is in place.

On the issue of Lanco eyeing the coal market, Kumar said, “For now there is a market. But, it is not that we are going to stop expanding our capacity creation. We are not going to be at 15,000 mw power generation forever. As and when we expand, we will start using the coal from the mines for captive purposes”.

Lanco currently has an operating power generation capacity of 1,995 mw and another 7,962 mw is under various stages of construction. The company expects to increase operational capacity to about 4,000 mw by 2011 and 15,000 mw by March 2015.

The company would require about 15 mtpa of coal for 4,000 mw of power generation and about 60 mtpa to support 15,000 mw of power generation.

Of the 15 mtpa coal that will be needed next year, Lanco has agreements for about 75% of coal from the domestic market. It is importing the balance.

In a statement, Lanco said the Griffin coal mine is strategically located, closer to India than the mines in New South Wales and Queensland.