Itochu to buy 10 % of Drummond's Colombian coal assets for $1.3 bn

Itochu Corp, Japan's fourth-biggest trading house, yesterday said that it will pay $1.52 billion for a 20-per cent stake in the Colombian mines of Drummond Company, the largest merchant coke producer in the US.

The deal, announced by the $45.2 billion Tokyo-based trader, values the Colombian assets of Drummond at $7.6 billion, in line with the $7.5 billion expectation when it was put up for sale last year, but way above the $6 billion that some bidders were willing to pay.

Armed with about Rs39,000 crore in cash and Rs6,000 crore for overseas acquisitions, Coal India Ltd (CIL), the world's largest coal producer, had submitted a $5-billion bid in December for the Colombian assets of Drummond, which has road, rail and port infrastructure in place.

Other interested bidders were Glencore, the world's biggest commodities trader, Xstrata, the Switzerland-based diversified mining company and Brazilian mining giant Vale SA.

Under the deal, Itochu will own 20 per cent of the Colombian operations of Drummond through a new subsidiary Itochu Coal Americas Inc. Itochu will obtain the exclusive rights to market this coal in Japan and to electric power utilities and to other coal consumers in other Asian countries.

Privately owned, Birmingham, Alabama-based Drummond is the largest merchant coke producer in the US having reserves of over 2 billion tonnes at its coal mines in Alabama and Colombia.