CVRD pushes to become coal producer

Iron ore giant Companhia Vale do Rio Doce (CVRD) (RIO-N) has bought coal company AMCI Holdings Australia for $769 million.

AMCI, a private company based in Brisbane, holds stakes in several joint venture coal properties in Australia with a combined capacity to produce up to 8 million tonnes of coal per year. The company has a reserve of 103 million tonnes of coal, most of which is coking coal, which is vital for steel making.

CVRD says investing in the coal business is an important part of its growth strategy.

By 2010, CVRD aims to produce 30 million tonnes of coal annually.

The company will also take on AMCIs net debt, which was more than $144 million as of November 2006.

AMCIs properties are located in Hunter Valley in New South Wales and the Bowen Basin in Queensland both known as major coal producing regions in Australia.

As a part of the acquisition, CVRD will gain a 61% stake in Integra Coal for open pit and underground mines in Hunter Valley.

CVRD will also have 80% control of the Carborough Downs underground mine, which will go into full production by 2009-10, 50% of Isaac Plains open pit mine, also set for full production by 2009-10, and 100% of the Broadlea open pit mine.

The deal includes an extensive coal exploration portfolio with potential for 3 billion tonnes of non-audited mineralized material.

CVRD already has two 25% joint ventures with two Chinese coal companies: Shandong Yankuang International Coking, which produced 5 million tonnes of coal in 2006 and Henan Longyu Energy Resources, currently in ramp-up to produce 2 million tonnes per year.

CVRD is working on a feasibility study to develop a coal deposit in Mozambique, estimated to produce 10 million tonnes per year of coking coal and 2 million tonnes per year of thermal coal, which is used for heat energy. The company is also preparing a pre-feasibility study for the Belvedere deposit in the Bowen Basin, which has an estimated resource of 2.7 billion tonnes coal.