KEPCO set to buy $100 mln Australia coal mine stake

State-run Korea Electric Power Corp. (KEPCO) is leading a group of South Korean firms in advanced talks to buy a 10 percent stake in an Australian coal mine from Felix Resources for $100 million, a KEPCO official said on Tuesday.

"We are in talks with Felix Resources. We expect to reach an agreement in September," Lee Sang-Pal, KEPCO's general manager of project development, told reporters at a Coaltrans conference. He did not name the other firms in the consortium.

Lee said it was Felix's wholly owned Moolarben mine.

Felix will begin construction of the mine in mid-2007 and expects production of high-quality thermal coal to reach 4 million tonnes in fiscal 2008, scaling to 10 million tonnes by fiscal 2010, it says on its Web site (http://www.felixresources.com.au/moolarben.html).

Measured, indicated and inferred resources at Moolarben are estimated at 226 million tonnes, Felix's Web site says .

Lee said the company is also looking to buy 10 percent stakes in Australia's Anvil and Tarabora coal mines, but he could not give further details on the seller or investment.

The Anvil Hill project, led by Australia's Centennial Coal and located in the west of Australia's coal-rich Hunter Valley region, is expected to produce up to 10.5 million tonnes per year of coal. But the project has drawn protests from environmental groups as it will cause the clearence of a large forest.

Centennial has said before it may sell a stake in the mine.

EYES ON INDONESIA, MONGOLIA

Lee said KEPCO, which is also trying to take equity stakes in Indonesian and Mongolian coal mines, has teamed up with Indonesia's PT Sebukit Power to explore building a 200 megawatt coal-fired power plant in Kalimantan, on Borneo island.

"We have no budget for these overseas investments. We are working very hard to get stakes in coal mines in the region," Lee said.

The mine deal would be South Korea's biggest overseas coal investment, surpassing the more than $50 million deal between state-run Korea Resources Co. and top refiner SK Corp. in March. The world's second-biggest coal importer is scrambling to lock in supplies amid growing competition from China and India.

In April, India's Tata Power Co. bought a 30 percent stake in a set of Indonesian mines from PT Bumi Resources for $1.3 billion.

Felix, which said in November that it had been in talks to sell a 49 percent share of its Yarrabee Mine to privately held Coal Resources Corp., is one of Australia's smaller miners, with three mines producing about 3.6 million tonnes.

With the development of two other mines, it hopes to lift production to 15 million tonnes by 2010, it said on its Web site.

Shares in Felix Resources matched a more than five-year high of A$5.90 on Monday before easing 1.5 percent to A$5.77 on Tuesday, although it moved off the day's low of A$5.58.

Shares in Centennial jumped 3 percent to A$3.09 cents, against a 0.3 percent drop in the broader market .

Korea's coal demand is predicted to grow by 7 percent annually in the coming years, requiring another 15 million tonnes a year by 2010, industry experts said.