Straits in Talks to Sell Stake in Asian Coal Unit

By Jesse Riseborough

Dec. 4 (Bloomberg) -- Straits Resources Ltd., an Australian copper, gold and coal mining company, is in talks to sell a S$403 million ($264 million) controlling stake in its Asian unit after receiving approaches from potential buyers.

Straits Resources received offers from financial companies, traders, power producers and mining companies for its 47.1 percent stake in Singapore-listed Straits Asia Resources Ltd., Chief Executive Officer Milan Jerkovic said in an interview from Perth. He wouldn’t identify any of the bidders, saying a transaction may not take place and would depend on shareholder support.

Straits Asia supplies coal to Japan, Taiwan and South Korea from mines in Indonesia. Demand for thermal coal next year will fare better than the predicted slump in requirements for coking coal and iron ore, Goldman Sachs JBWere Pty said last month.

Jerkovic said in October the company was reviewing all its operations and curbing expansions and exploration costs to reduce spending as a slump in metals prices eroded margins. He is also chairman of Straits Asia, which was spun out of Straits and began trading in Singapore in November 2006.

Straits Resources rose 8.4 percent to 90 Australian cents at the 4:10 p.m. Sydney time close, giving it a market value of A$210 million ($135 million). Straits Asia rose 6.8 percent to 78.5 Singapore cents at 2:31 p.m. local time, giving it a market value of S$856 million.

The value of Straits Resources’ stake in Straits Asia is higher than Straits Resources market value, Jerkovic said, adding that meant Straits Resources wasn’t “totally immune” from a takeover.

Macquarie Advises

“We don’t use the current market valuations as a benchmark for anything because these assets have a certain cash flow,” Jerkovic said today by phone. “It will come down to our shareholders as to whether they see the value” in an on-market takeover, he said.

The company is being advised by Macquarie Group Ltd. and Standard Chartered Plc, Jerkovic said today. Straits first announced the approaches today in a statement to the Australian Stock Exchange.

Straits Resources deferred an underground expansion at its Tritton copper mine last month and will complete a review into current output rates in January, Jerkovic said today.

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