Waratah Coal Inc., the Canadian company proposing Australia’s largest coal mine, may seek partners to help develop its A$5.3 billion ($5.2 billion) mining, port and rail project and gain from rising prices.

The mine may start shipping fuel from a harbor, the first new coal-export port in Australia for 25 years, by 2012, the Queensland state government said today. Waratah is in preliminary talks with partners to help fund the project, which may initially produce 25 million metric tons of power-station coal a year, Chief Executive Officer Peter Lynch said.

Prices for thermal coal advanced to a record earlier this month amid rail and port bottlenecks in Australia and South Africa and rising demand from Asian electricity producers. Coquitlam, British Columbia-based Waratah’s project includes a 495-kilometer (308-mile) rail line that may help open as much as 20 billion tons of coal resources for export from the state.

“It’s a matter of whether the market demand is there longer term,” said Clyde Henderson, a Sydney-based analyst at Barlow Jonker Pty, a unit of Wood Mackenzie Consultants Ltd. “Being further inland there are increased costs involved with that, and as they’ve obviously made plain, there’s a lot of capital expenditure to be made for that to happen.”

Waratah Coal rose 6 cents, or 1.8 percent, to C$3.36 yesterday on the Toronto Stock Exchange. The stock has gained 46 percent this year, valuing the company at C$188 million ($187 million).

Rockhampton, Mackay

The proposed port, between Rockhampton and Mackay in central Queensland, would have a capacity of as much as 100 million tons a year, the state government said.

The coal producer has received interest from utilities in Asia and is in the early stages of studying funding options that include share sales and debt, Lynch said by phone today from Brisbane. A final decision on funding is expected by late 2010, he said.

“There are a number of reasons why a significant or a strategic partner in a minority stake could be of interest to the company,” Lynch said. “There is a huge amount of interest from the overseas power generating industry as they strive to look for some long-term supply security.”

The mine, near Alpha, would be Australia’s biggest by output, and could support expansion to 50 million tons annually, he said.

Australian Listing

The company is in talks with potential partners and third- party users of the rail and port systems, it said. It yesterday appointed ABN Amro Morgans Ltd. as the sponsoring broker for a planned share listing on the Australian Stock Exchange.

“The Galilee Basin is Australia’s biggest undeveloped coal province, with an ultimate resource potential in excess of 20 billion tons,” Lynch said. “This is essentially a 50- to 100- year project.”

Thermal coal prices have doubled in the past year and mining companies including Xstrata Plc, the world’s largest exporter, won a 125 percent increase in annual contract prices in the year that started April 1 to $125 a ton. Contract prices for the fuel may rise to a record $150 a ton next year because of continuing supply constraints and growing demand from Asian utilities, Goldman Sachs JBWere Pty said in a July 11 report.

The Queensland state government is studying three new development proposals, including Waratah’s, premier Anna Bligh said today in the statement. BHP Billiton Ltd., as part of an existing venture with Mitsubishi Corp., is seeking to build two new coal mines and expand another in the state, increasing exports by about 20 million tons annually, Bligh said.

Xstrata has also proposed a new mine, the Wandoan coal project, expected to produce 30 million tons of coal annually, Bligh said. The project could account for a quarter of Australia’s total thermal coal exports, she said.

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