Marubeni says Grande Cache coal deal can be platform for more in Canada

Post on: 2011-11-02 By: admin

The $1-billion deal to buy Grande Cache Coal (TSX:GCE) could be used by Marubeni Corp. to develop a future coal business in Canada, the Japanese trading house said Tuesday.Koji Iwama, general manager for Marubeni's coal department, said the purchase in partnership with Hong Kong-listed Winsway Coking Coal Holdings Ltd. provides a secure source of hard coking coal for Japan.Flooding in Australia earlier this year put millions of tonnes of steel making coal production out of commission and helped push up prices."This project is very important for Marubeni from a point of diversion to secure an alternate source of supply of HCC from countries other than Australia to ensure stability of supply to Japan," Iwama said in a statement."Also this acquisition can be the start for Marubeni to develop the future coal business in Canada."Marubeni is one of the largest Japanese trading houses involved in wide range of industries including metals and mineral resources, transportation machinery, food, textiles, materials, pulp and paper and chemicals.The company announced a deal on Monday to buy Grande Cache Coal with Winsway, which supplies coking coal from around the world to the Chinese steel industry, for $10 per share.The agreement was the latest involving an Asian company buying into the Canadian resource sector, where Asian companies have acquired major mining, oilsands, natural gas and potash assets in the last two years.Grande Cache is a producer of metallurgical coal and holds coal leases covering more than 22,000 hectares in the Smoky River coalfield in west-central Alberta.The company is expected to sell 2.2 million to 2.4 million tonnes of coal in its current financial year and increase that to 3.5 million tonnes in its 2013 financial year.China has roughly half of the world's steel production capacity and demand for the metal and the the coal used to produce it has been soaring as the country builds roads, highways, bridges, factories and office buildings.China Investment Corp. acquired a nearly 20 per cent stake in Vancouver-based Teck Resources, Canada's largest producer of metallurgical coal, in 2009 for US$1.5 billion.Shares in Grande Cache were down 10 cents at $9.77 in trading on the Toronto Stock Exchange, just below the offer price by the Marubeni-Winsway partnership.Scotia Capital analyst Jackie Przybylowski called the offer for Grande Cache a fair bid for the company and did not expect any additional bids."We note that Xstrata and Anglo American have recently completed acquisitions in the Peace River coalfield region, which is nearby to Grande Cache Coal's property but not likely close enough to generate any operating or transportation synergies," Przybylowski wrote in a note to clients Tuesday.
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