Vale targets Aquila share of Belvedere coal project

The price for Aquila’s stake will be “Fair Market Value” determined in accordance with terms of the Belvedere Joint Venture Agreement.
Vale global coal MD, Decio Amaral said some media and broker reports suggesting inflated figures for interests in the project were by their nature unreliable and made without consideration to specific requirements under the Belvedere JV Agreement, as they were speculative and based only on public information.
“Also, in some cases they were done prior to the release of the Pre-Feasibility Study results by the Manager and prior to the announcement of the Australian Government’s Resource Super Profits Tax,” he said
Amaral said Vale’s view was that the AMCI transaction provided a clear indication of the fair market value for an arm’s length transaction for an equivalent interest between two parties with intimate knowledge of the project.
“Negotiating the sale gave both Vale and AMCI certainty in the struck price. This certainty could not be achieved by either party through the option process. The price paid for the asset was fully attributable to the joint venture interest in question and did not include any other undisclosed component,” he said.
He said the Super Profits Tax added another dimension of challenge to the Belvedere Project that would require a large investment in capital and expertise, but Vale had a long and successful track record of developing difficult but rewarding large projects.
A pre-feasibility study indicates an underground longwall mine producing initially 3.5 Mtpa of coking coal and then up to around 7 Mtpa with a second longwall mining unit.
In Australia, Vale now has:
• a 61 per cent stake in Integra Coal in the Hunter Valley;
• an 80 per cent stake in the recently expanded Carborough Downs Coal near Moranbah;
• a 50 per cent stake in Isaac Plains Coal also near Moranbah;
• 100 per cent ownership of the Ellensfield coal project near Moranbah;
• a 50 per cent stake in the Eagle Downs coal project near Moranbah;
• a 75.5 per cent stake in Belvedere coal project.
In relation to its interests in the Eagle Downs hard coking coal project in Queensland, Vale is accusing its 50:50 partner, Aquila Resources, of trying to “add words” to a budget approval condition for the 2010-11 budget.
Aquila wants the scope of the feasibility study to include port and rail logistics for the project which would be “acceptable to a reputable financial institution” experienced in funding similar projects.
But Vale subsidiary Bowen Central Coal does not accept Aquila’s additions to a budget approval condition as either “necessary” or in accordance with the terms of the JV agreement.
Aquila wants a commitment to Abbot Point Coal Terminal while BCC seeks to commit to future capacity at Dalrymple Bay Coal Terminal which may not be available until 2015 which would push back the schedule for the project.
Both parties have issued each other notices of dispute, with the outcome to be determined by negotiation or arbitration.