Reuters interview with Straits Resources

Australian miner Straits Resources said on Thu it plans to grow its coal unit through acquisitions, and was targeting deals worth between A$1-A$2 b in Australia. Straits Resources, which owns 47% of Straits Asia Resources, said in Apr it was splitting its coal and metals businesses into 2 to improve its growth prospects.

"That's the only size that is relevant," Straits Resources CEO Milan Jerkovic told Reuters in an interview.

"You only do a corporate transaction of this size once every couple of years. So when you go ahead, you have to make sure it's a meaningful acquisition, especially since this is a consolidation phase in the industry," he said.

Jerkovic said Straits Resources was eyeing several Australian coal firms that are already in production and it has already begun talks with some of them.

"We are looking for companies that are more mature, either they are producing or ramping up production. We're looking for something that is meaningful globally so it has to be in the 5-10 m tonne production space," he said.

Jerkovic said the firm has been wanting to acquire coal assets in Australia for a long time, but discussions with producers have not been fruitful because of its status as a diversified miner.
Straits Resources' demerger plans include distributing its take in Straits Asia to its own shareholders, ahead of getting an Oct listing for Straits Asia in Australia to make it easier for local mining investors to trade in the stock.

Jerkovic says Straits Asia, which recently acquired coal fields in Magadascar and has signed a coal exploration agreement in Brunei, has plenty of strong growth opportunities and needs to grow quickly to avoid being taken over.

"We have to grow faster and bigger than what others are prepared to pay. We will give shareholders the options if the right offers come but for now, I think the right strategy is to grow and compete in that space," he said.

Corporate activity in Australia's coal sector has picked up in the past year, amid a tripling of coal prices from a year ago due to supply constraints.

Straits Resources, which has a market value of about A$1.2 b, has a diverse suite of coal, gold and copper assets in Indonesia and Australia.

Its flagship asset, Straits Asia Resources, has a market value of about US$1.78 b. The unit has 2 thermal coal operations in Kalimantan, Indonesia, that are on track to produce about 9 m tonnes in '08 and are expected to reach 19 m tonnes in the next 2 to 3 years.

Jerkovich said the demerged coal unit was targeting to reach a total output of about 50 m tonnes within 5 years, of which about 10 m tonnes of output would be coking coal.