Anglo, BHP Billiton may join coal mines
May 21, 2004
By Bloomberg and Nicky Smith
Johannesburg - By the end the year the world's two biggest mining companies, Anglo American and BHP Billiton, will know if they will parent a new company, Western Complex, to manage their rich coal deposits in the north of the country.
Yesterday the two firms announced that they had signed a memorandum of understanding to investigate the potential expansion of their large adjacent coal resources at Ogies, about 100km east of Johannesburg.
The complex could combine BHP Billiton's Khutala mine and its planned $280 million (R1.88 billion) Klipspruit mine with its Weltevreden coal reserves, with the deposits known as Zondagsfontein, Smaldeel and Beesting held by Anglo, the two firms said.
Hilton Ashton, a commodities consultant for Absa, described the deal as "very interesting".
"These two big companies for the first time are optimising their joint coal holdings. They have done this because it makes business sense. They will optimise their holdings by sharing costs and creating economies of scale."
Anglo's spokesperson, Marion Dixon, would not say how long the investigation would take or how much it would cost.
The statement intimated the investigation was likely to be concluded within the calendar year.
By developing the project, to be known as the Western Complex, the firms hope to boost coal supplies to Eskom Holdings, the world's biggest buyer, and coal exports to power stations.
Ashton said Eskom was planning to recommission some of its mothballed stations, which meant it would need more coal
Separate developments would cost too much to make some of the projects viable, said BHP Billiton.
The two together mine about 130 million tons of coal annually in South Africa. An alliance could "mean growth for Anglo Coal and reserve optimisation for BHP Billiton", said Dixon.
"Today's announcement is a bit of an invitation to any interested companies to raise their flag," said BHP Billiton spokesperson Michael Campbell.
Shares in BHP Billiton fell R1.40 to R54.10 yesterday and Anglo lost R3.70 to R132.20, while the top 20 resources index declined 1.55 percent.
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