Vale, Aquila differ on coal mine price

Global miner Vale appears headed for a showdown with Perth-based Aquila Resources over a lucrative quarter stake in the proposed $2.8 billion Belvedere underground coal project in Queensland.

Project operator Vale, which earlier this week agreed to acquire a 24.5 per cent stake in Belvedere from private miner AMCI Holdings for $US92 million, yesterday exercised its option to purchase the remaining 24.5 per cent held by Aquila to take full ownership of the asset.

Aquila, which has flagged its intent to exit the project to focus on its other Queensland coal projects and $4 billion West Pilbara iron ore project, indicated it expected a significantly better price than achieved by AMCI for its stake.

Under the terms of the Belvedere joint venture agreement, the sale of the stake must be struck at fair market value as determined by two valuers. If the two valuers cannot agree on a price within a 10 per cent range, a third valuer will be appointed and the price set according to the average of the three estimates.

Aquila noted that the price for AMCI's stake had been agreed between Vale and AMCI "without any prior knowledge, input or involvement of Aquila, and was not conducted under the fair market value determination process".

"Aquila's view is that the purchase price for the recent Vale Belvedere (BC) acquisition is not reflective of (and is lower than) the fair market value," the company said, noting several broker reports which valued the stake at between $143 million and $455 million.

Consequently, Aquila said it expected to take about three months to determine the price payable by Vale "unless otherwise agreed or determined earlier in accordance with the process set out in the joint venture agreement".

While Vale said Aquila would recieve "fair market value" for its stake, it queried any suggestion it was worth as much as speculated by brokers.

Vale global coal managing director Decio Amaral said some media and broker reports suggesting inflated figures for interests in the project were by their nature unreliable.

He said that they had been made without consideration to the specific requirements for determining "fair market value" under the joint venture agreement.

"Also, in some cases they were done prior to the release of the pre-feasibility study results by the manager and prior to the announcement of the Australian government's Resource Super Profits Tax," Mr Amaral said in a statement.

Mr Amaral said Vale's view was that the AMCI transaction provided a clear indication of the fair market value for an arm's length transaction for an equivalent interest between two parties with intimate knowledge of the project.

He said the proposed super profits tax added another dimension of challenge to the Belvedere project that would require a large investment in capital and expertise but that Vale had a long and successful track record of developing difficult but rewarding large projects.

A pre-feasibility study of Belvedere, near Moura in the Bowen Basin, indicated an underground longwall mine producing initially 3.5 million tonnes per annum (Mtpa) of coking coal and then up to around 7 Mtpa with a second longwall mining unit.