Yanzhou bid for Felix on the cards

MELBOURNE - Yanzhou Coal Mining and Felix Resources halted trading of their shares amid speculation that China's fourth-biggest coal producer plans a takeover bid for its Australian rival.

Felix expects an announcement on a potential change of control, the Brisbane-based company said yesterday in a statement to the Australian stock exchange. Yanzhou Coal may bid A$3.7 billion bid ($4.6 billion), or "just under" A$20 a share, for Felix, the Sydney Morning Herald reported.

"The speculated purchase price is high," Martin Wang, an analyst with Guotai Junan Securities, said. "Yanzhou Coal may have to issue additional shares to raise funds for the acquisition." Felix has climbed 92 per cent this year to A$16.20.

China, the world's biggest coal and metal user, is buying mines and oil fields to meet rising demand spurred by the government's 4 trillion yuan economic stimulus plan.

Bids for resources by China, whose US$1.95 trillion in currency reserves are the world's largest, have been met with opposition from lawmakers in Australia and relations between the countries have been strained since the arrest of four Rio Tinto Group executives in July.

Felix, which supplies coal to South Korea and Japan, fell 1.2 per cent to A$16.90 on August 7, giving the company a value of about A$3.3 billion. Yanzhou Coal shares have more than doubled in Hong Kong trading this year.

"Yanzhou was the name that was speculated on earlier this year," said Andrew Harrington, a mining analyst at Patersons securities. "Reading between the lines it looks like some kind of deal has been struck."

Australia is the world's biggest shipper of coal and iron ore and China bought 44 per cent of the country's mineral exports last year.

Felix, which owns the Yarrabee, Minerva and Ashton mines in Australia and a stake in a coal port, produces soft coking coal, an ingredient in steelmaking, and thermal coal, used by power stations. The company is also building the Moolarben coal mine in New South Wales.

- BLOOMBERG