Felix Marks Time In Suitor Search
Sydney Morning Herald
Tuesday August 12, 2008
FELIX RESOURCES has confirmed that legal manoeuvring by Xstrata Coal will delay construction on its $405 million Moolarben coal project near Mudgee.
Felix had hoped to start construction on the open-cut mine this month, but the NSW Court of Appeal ruled on a long-running dispute over land access with Xstrata on Friday, and the decision will delay the project by at least 21 days, Felix said. The keenly sought independent miner has opened a data room to potential suitors and miners and may opt to wait for the outcome of the appeal before tabling a definitive $3.5 billion-plus takeover proposal. The Herald understands that due diligence is in early stages and none of the interested parties has so far been culled. The court did not hand down orders but gave Xstrata and Felix 21 days to make submissions on the appropriate orders to be made. Those orders could be contested in the High Court, which would further prolong the Moolarben development. Xstrata owns the Ulan mine next to Moolarben and some of the land that Felix wants to mine as part of the project. The Anglo-Swiss miner has based its arguments against the Felix plans to mine about 5 million tonnes of the 406 million-tonne Moolarben resource on the fact that the area contains such improvements as a road for Ulan, storage sheds, cattle fences and stock dams. Felix might agree to a quarantine on that 5 million-tonne resource in the mining lease it holds, but if so, it would have to make adjustments to the proposed layout of the project, which could require minor planning approvals. The disputed lease contains about 48 million tonnes of resources amenable to open-cut mining. Depending on the legal interpretation of the Mining Act, Felix might not be able to have the lease amended, in which case it would have to apply for a lease that excluded the disputed area. "It's an impediment from the short-term development of Moolarben ... not a company-stopper," said a UBS analyst, Glyn Lawcock. "If the leases are fully expunged, then the worst case is they lose ... about 12 per cent of their resource. That doesn't make the project uneconomic." Xstrata has long had a keen interest in the Moolarben project. It lost a bid for the exploration licences to Felix in 2004 and last year held unsuccessful takeover talks with Felix. Last month Xstrata stopped mining at the open-cut portion of its Ulan mine and placed the dragline and other open-cut equipment on care and maintenance. It is mining underground at Ulan and has a coal preparation plant on the site. Xstrata is seeking approval to double its maximum mining and processing rate to 20 million tonnes a year based on mining a smaller open-cut area and running two longwalls underground. It is understood the company is not participating in the Felix sales process, but it is interested in the outcome. "Xstrata, I would have thought, would have the most synergies," Mr Lawcock said. "Who is to say they don't come into this process at some stage?" Felix shares closed $1.22 lower at $18.20 yesterday.
© 2008 Sydney Morning Herald