Billionaire Nathan Tinkler’s coal explorer Aston Resources and coal miner Whitehaven Coal have started talks about a potential merger that analysts say would create a powerful entity.
By 1443 AEDT, Aston shares were up 4.61 per cent at $9.53 while Whitehaven’s shares had risen 2.13 per cent to $5.76.
Whitehaven on Monday said the discussions were incomplete and there was no guarantee that an agreement would be reached.
Aston said in a separate statement that it was committed to growth on a standalone basis but continued to explore other alternatives.
The 35-year-old Mr Tinkler is Australia’s youngest billionaire and Aston’s major shareholder, with an ownership stake of around 30 per cent.
Ownership of Australia’s coal industry is tightly held and Aston says its Maules Creek project in NSW, which will cost $553 million to construct, is one of the few remaining top class mining assets yet to be developed.
Whitehaven has previously flagged its openness to corporate deals, beginning a formal sale process in October 2010 following several informal approaches from parties interested in making a takeover bid.
However, the miner took itself off the market in May, saying none of the proposals were high enough.
Breakaway Research analyst Grant Craighead said a combination of Whitehaven’s producing assets in NSW’s Gunnedah Basin with Aston’s project would create a powerful coal miner.
Aston could access Whitehaven’s export infrastructure, while Maules Creek would be a good addition to Whitehaven’s portfolio, Mr Craighead said.
“There would be potential synergies in putting the two groups together, which are both fairly entrepreneurial,” he told AAP.
“It would make a powerful group.”
The big question was whether Mr Tinkler would be prepared to relinquish control, Mr Craighead said.
“He’s a strong character … so it would have to fit with his objectives and be on terms that he found reasonable.
“Whitehaven has demonstrated that they want a full or fair price for their assets and whether Nathan Tinkler would be prepared to pay that is open to conjecture.”
Whitehaven is targeting a near three-fold increase in production to more than 14 million tonnes per annum (Mtpa) over the next five years, from about 5.4 Mtpa currently.
However, poorly priced existing sales contracts remain in place this financial year, which would mean the company would not get the full benefit of high coal prices, Breakaway said in a recent research note.
Breakaway also said Whitehaven’s longer-term plans were advancing, with additional port capacity secured and slow but steady progress made on its Narrabri underground development in north-west NSW.
Whitehaven hopes to start mining at its Vickery project in the second half of calendar 2013, adding to its four existing open cut mines: Tarrawonga, Werris Creek, Rocglen and Sunnyside.
Aston in October agreed to sell a 10 per cent stake in Maules Creek to Japan’s J-Power for $370 million, after selling 15 per cent to Japan’s ITOCHU in early 2010 for $345 million.
Aston bought Maules Creek in 2009 – the bottom of the market – for about $500 million from mining giant Rio Tinto, which was offloading assets to reduce debt.
