Felix Jumps After Report on Talks for A$3 Billion Bid

By Rebecca Keenan and Jesse Riseborough

Dec. 5 (Bloomberg) -- Felix Resources Ltd. rose by the most in almost 20 years in Sydney trading after the Australian Financial Review reported Yanzhou Coal Mining Co. was in talks to acquire the coal producer for more than A$3 billion ($1.9 billion).

Felix rose 40 percent to A$7.59 at 1:45 p.m. local time, its biggest gain since Feb. 1989. The Brisbane-based company, which flagged approaches in July, today there’s continuing interest in a takeover, without naming any groups. Yanzhou Coal today suspended trading of its shares in Hong Kong, giving no reason.

Chinese mining investors may start pursuing acquisitions in more advanced countries after the global economic slump lowered project values and increased choice, Global Mining Corp. said this week. Major shareholders of Felix, which owns three mines in Australia and a stake in a coal port, expect a price that may be more than A$15 a share, the Financial Review said.

Felix could be valued “in that ballpark certainly and higher, I could justify a higher price than that,” Tom Sartor, a mining analyst at ABN Amro Morgans Ltd., who has a target price of A$14.01 on the stock, said today from Brisbane. “It’s a meaningful company up for sale and it would diversify Yanzhou’s geography and operating risks.”

China Shenhua Energy Co., the nation’s biggest coal producer, said last month it paid A$299.9 million for an exploration license in Australia as it expands overseas to gain supplies. Prices for thermal coal, which accounts for about 60 percent of Felix’s output, may drop 16 percent next year to $105 a metric ton, RBC Capital Markets said Dec. 3. That’s still almost double the 2007 price.

Ashton Mine

Executives from Yanzhou, China’s fourth-biggest coal company, visited Felix’s Ashton coal mine in New South Wales state yesterday to study the company’s accounts, the newspaper reported. Felix mines soft coking coal, an ingredient in steelmaking, and thermal coal, used by power station, in New South Wales and Queensland.

Felix, which reported a fourfold increase in profit last year, is also building the A$405 million Moolarben mine in New South Wales. The company is part of the Newcastle Coal Infrastructure Group that’s building a new terminal at an estimated cost of A$1 billion.

“It’s got a great asset in Moolarben and a share in a port, which is worth a lot,” ABN Amro’s Sartor said.

The company appointed advisers Wilson HTM Corporate Finance and Citigroup Global Markets Australia Pty Ltd. in July following approaches from several unidentified companies, the company said.

American Metals and Coal International Inc., a closely held mining investment company, bought a 19.2 percent stake in Felix for A$188 million on March 21, 2007. Wilson HTM arranged the purchase. Felix sells part of its coal through AMCI.

Growth in the seaborne trade in the fuel is set to increase by 15 million tons next year to 615 million tons, more than double this year’s expected growth of 6.2 million tons, The McCloskey Group said last month.

To contact the reporter on this story: Rebecca Keenan in Melbourne at rkeenan5@bloomberg.net; Jesse Riseborough in Melbourne at jriseborough@bloomberg.net