Coal India Ltd. (COAL), facing a drop in output for the first time in more than a decade, is accelerating its search for overseas assets after talks with Massey Energy Co. and Peabody Energy Corp. failed.
Delays in land acquisitions and environmental clearances to develop projects have hindered efforts by the world’s biggest producer of the fuel to boost production, Chairman N.C. Jha said in a phone interview. The government last month allowed state- run Coal India, which has $9.1 billion of cash, to buy unlisted overseas companies.
“The government approval allows us to move faster,” Jha said. “We have to try every possible option including acquisitions to meet supply commitments. We’re still struggling to meet our production targets.”
Production at Coal India, which mines more than 80 percent of the country’s coal, dropped 5 percent in the first six months of the year because of heavy rains and a one-day strike. Should full-year production decline, it would be the company’s first since at least 1998, Jha said.
“The kind of cash Coal India has, it makes every sense to look for acquisitions,” said Prasad Baji, an analyst at Edelweiss Capital Ltd. in Mumbai. “Although we have enough resources in the country, we still need to look outside because of some fundamental problems.”
Talks to acquire stakes in a U.S. mine of Massey Energy and an Australian mine of Peabody Energy were inconclusive because of procedural delays, Jha said.
Shares of Coal India fell 1.1 percent to 325.90 rupees in Mumbai yesterday. The shares have risen 3.5 percent this year, compared with a 15 percent drop in the key Sensitive Index.
Higher Production
The company, which mined 431.3 million metric tons of coal in the year ended March 31, plans to increase production by about 5 percent this year to meet demand. Daily output rebounded almost 60 percent from the rainy months of August and September to 1.2 million metric tons and is expected to go up to 1.5 million tons by the end of this month, Jha said.
Coal India should focus on its domestic business, where the return on investment is higher, Oscar Veldhuijzen, a partner at The Children’s Investment Fund Management UK LLP in London, said in August. The fund is the biggest owner of Coal India after the Indian government, with a holding of 1.04 percent as of Sept. 30, according to data compiled by Bloomberg.
India’s estimated coal resource is 267.2 billion tons, of which 105.8 billion tons are proven, according to the coal ministry’s website.
To contact the reporter on this story: Rajesh Kumar Singh in New Delhi at rsingh133@bloomberg.net
To contact the editor responsible for this story: Amit Prakash at aprakash1@bloomberg.net
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