Shell invites offers for its coal operations

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The Independent Online
SHELL PUT its international coal business up for sale yesterday, inviting tenders for the Australian based operations which analysts predicted could fetch over $1bn.

The move - which has been expected since Shell reorganised its coal interests into a stand alone, Brisbane-based business in 1997 - comes as Royal Dutch Shell's chairman, Mark Moody-Stuart, tries to refocus the parent company on its oil and gas operations after last year's 95 per cent fall in profits and $4.5bn write-down.

"Several international buyers have approached the Shell Group,'' Shell Coal's chief executive Bob Scharp said yesterday.

Analysts said the business, which was the third largest producer in Australia last year with 13 million tonnes, could prove attractive to Rio Tinto, the second largest producer in Australia with 21.1 million tonnes, or BHP, the largest with 35.6 million tonnes.

Other buyers expected to show an interest include the German coal mining and chemicals company RAG, Shell's own former mining subsidiary Billiton, the South African giant Anglo American and the Swiss commodities investor, Glencore International.

"Ruhrkol (RAG) have to expand outside Germany or else they haven't got much future as a miner,'' said Clyde Henderson, an analyst at AME Mineral Economics. "I think they are probably the Number 1 suspects.''

Rio and BHP had no comment on the sale. But in a clear reference to Rio, an industry source said: "The largest mining house in Australia, and in the world, would be looking." A Glencore official, meanwhile, said the company was always on the lookout for purchases.

Shell Coal operates seven mines in Australia, as well as holding 25 per cent of Venezuela's largest mine, Paso Diablo. One analyst said Shell could receive up to $1.5bn, depending on the price received for the Callide power project, an 840MW low-emission coal fired plant being built in Queensland. It also has marketing and trading operations in London and Sydney. Thirty per cent of its production is in steaming coal - which is primarily used to fuel power stations - and another third is accounted by coking coal, used in steel blast furnaces.

The price for coking coal is 18 per cent below last year's as demand from Japan fell, where steel output was at a 27-year low in the year ended March.

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