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This Coal Mine Valued At $630 Million In 2011 Just Sold For One Dollar
The following photos are from Australia's Isaac Plains coking-coal mine.





Why is Isaac Plains relevant? Well, in 2011 at the height of the Australian mining boom, Japanese conglomerate Sumitomo thought it has spotted a bargain, and a SMH reports, it approached Tony Poli, the founder of mid-tier miner Aquila Resources with an offer: it would buy its 50% stake in Isaac Plains, at the time Aquila's only producing mine, for $430 million.
Market participants thought Aquila's stake might fetch $300 million at best but Sumitomo was confident it would make a strong return, and offered almost 50% above fair value, especially since Brazil's legendary mining company Vale owned the other 50% stake.
Net, the total value of the Isaac Plains mine in 2011 just just about $630 million.
It turns out Sumitomo was very, very wrong, and within a few years the writing was on the wall. In September 2014, Sumitomo and Vale shuttered the mine citing the downturn in the international coal market. Sumitomo said it would also take a writedown worth ¥30 billion ($11 million) on its Australian coal investments.
And as SMH tongue in cheekly adds, Isaac Plains was added to the long list of coal mines up for sale – but at a price. That price was finally revealed on Thursday: the princely sum of $1.
Why the complete collapse in price of the mine? Simple: blame China.
As Bloomberg explains, "a slump in the price of coking coal, used to make steel, to a decade low is forcing mines to close across the world and bankrupting some producers. Alpha Natural Resources Inc., the biggest U.S. producer, plans to file for bankruptcy protection in Virginia as soon as Monday, said three people with direct knowledge of the matter. It was valued at $7.3 billion in 2008."
At the peak of the Chinese commodity bubble, which in turn resulted in a golden age for Australia's mining companies, production from Isaac Plains hit a peak output was 2.8 million tons a year, with coal sold to steelmakers in Japan, South Korea and Taiwan.
However, in the past year, with the bursting of the Chinese housing bubble, and the dramatic cooling off of China's shadow banking system, the commodity demand of Chinese ghost cities has gone on hiatus, and so has the production of mines such as Isaac Plains:
Coal’s demise is just part of a broader slump in commodity prices, which fell to the lowest in 13 years this month. The benchmark price for coking coal exported from Australia has slumped 24 percent this year to $85.40 a ton on Friday, according to prices from Steel Business Briefing. The quarterly benchmark price peaked at $330 a ton in 2011, according to Bloomberg Intelligence.
The closing of Isaac Plains and a second mine in Australia shut last year, Integra Coal, led to a 7.2 percent reduction in Vale’s total coal output in the first half of 2015. It took a $343 million writedown on its Australian coal assets, part of total impairments of $1.15 billion last year, Vale said Feb. 26.
Still, Vale's and Sumitomo's complete wipeout loss is someone else's gain, in this case the new owner of Isaac Plain, which acquired the assets for a nominal tip, and merely had to fun ongoing spending and any debt obligations.
The new owners of Isaac Plains, Stanmore Coal, hope to restart production in the first half of 2016 and estimate the mine could operate for another three years.
The market took notice when the news of the dramatic purchase hit: Stanmore remains a minnow with a market capitalization of just $30 million. But with its shares up nearly 70 per cent on Thursday, investors have taken to the deal.
Still, as SMH adds, sluggish coking and thermal coal prices will continue to weigh heavily however regardless of how quickly they can restart production. Metallurgical coal has fallen another 25 per cent since January to about $US82 a tonne, from more than $US300 in 2011, while thermal coal has lost 8 per cent since January to languish around $US59 a tonne, compared to about $US150 three years ago.
Then again, with Stanmore's cost basis virtually nil, it would be a fool not to take the discarded assets. As Kiril Sokoloff's 13D wrote recently, "Buy when they give it away. What are they giving away now?" and recount how in 1977, "we were walking uptown in New York City with a friend who worked for a prominent trust company. He told us that the trustees of an estate had just sold a triplex on East End Avenue for $1. The reason? The $3,000 per month maintenance was “depleting the assets of the estate”.
Last week, Glencore sold the Cosmos nickel mine for AU$24.5 million. In 2008, Xstrata Plc paid AU$3.1 billion for Jubilee Mines to gain control of Cosmos—the Perth-based company’s flagship operation.
For what it’s worth, Javier Blas tweeted this week that, based on data from Citi Research, 90% of all M&A that miners did since 2007 has been written off. Makes you wonder about the current M&A boom…
All of which makes the researcher wonder if investors are missing the big picture:
There is a giant infrastructure investment boom just getting started in Asia and along the Silk Road. Wasn’t the whole commodity boom of the last decade based on infrastructure investment in China? Now, it will expand to all of Asia and beyond.
It is interesting to note how little is being written in the West about One Belt, One Road (see related themes). China Development Bank notes that the number of cross-border projects underway in the Silk Road effort already amount to $980 billion. Reportedly, Asia’s infrastructure needs are close to $8 trillion by 2020.
It remains to be seen if China can rebound, and if purchases such as Stanmore's $1 acquisition of a site that has a resource of 30 million metric tons will be lucrative. At current prices, every incremental ton produced loses money. But maybe prices will rebound.
For now, however, one thing is certain - the biggest winner is not Stanmore despite its suddenly soaring stock price, but Tony Poli, the person who sold Issac Plains at the absolute top to the naive Japanese conglomerate:
[Poli] could barely believe his luck when Sumitomo came knocking. Then in 2014 Aquila was acquired by Baosteel and Aurizon for an eye watering $1.4 billion. It gave the two companies access to Aquila's West Pilbara iron ore project, but the timing could barely have been worse. Iron ore prices have slumped by more than half in the last 12 months leading to speculation Aurizon may be forced to eventually take a writedown on the value of the Aquila deal on its balance sheet.
All of which is a very timely reminder: it is never an actual profit, until it has been booked. And as noted above, for 90% of all M&A deals in the past decade, the only thing booked is 100% losses.
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Gold mines next.
I hear data mines are doing quite well.
The future is digital mining for bitcoins.
Speaking of Bitcoin, the ex-boss of MtGox was just arrested in Japan:
"local media reported that police are also investigating [Mark Karpeles'] possible involvement in the vanishing of hundreds of millions of dollars of the virtual currency when the exchange collapsed in 2014. It was not immediately clear if Karpeles was set to be charged with any offences."
http://www.theguardian.com/technology/2015/aug/01/ex-boss-of-mtgox-bitco...
The story is further down the ZH front page ;-)
And yet....
https://www.teck.com/Generic.aspx?PAGE=Teck+Site%2fMedia+Pages%2fMedia+D...
Teck is fine as of July 23 2015.......................
Was all the prior value strip mined away in stock buybacks and board level compensations?
As I have posted previously, many times, coal is an essential energy input in about 10 to 20 years to keep anything close to current electricity output.
Go do some research as to how much of the pie coal has today, realize everyone and their dog (progressives) want to kill coal, which will allow coal assets to be "cleansed" of their liabilities, primarily pensions and environmental through BK processes.
I do not know when the right time to get the assets is, but I do know the deep, old pockets are waiting in the wings to pick them up for (micro) pennies on the (soon to be defunct) dollar. And they will OWN energy in about 20 years.
Electric power is one of the last things ANYONE gives up, right before flushing shitters.
Regards,
Cooter
the buy of the century, the question is simply when. and will you be killed by the revolutionary masses for monopolizing the world's most important non-renewable resource?
per Wiki
Karpeles is Jewish a surname, of Czech origin, etc, etc.
If ZH let me dev for them, I could probably tell you whose comments are the most read, and what, generally, everyone is thinking/agreeing with.
Better read those privacy policies; in the last 5 years it has become VASTLY easier for people to record what others are doing. Generally the best bet is to not put information out there that you don't want read. Or at least change up your screen name from site to site.
As if you'd have to "dev for them."
Lulz.
Give laboratorymike a chance. Mabey he can fix the dobple post clusterfuk that Sacreligon gave us!
"I'm trying Tyler but you can't index a blob!"
"Follow this user's comments."
If you have to dev for ZH to do what every single user can do, you are a moron.
Welcome to Furt Clurb.
The commodities market is being sacrificed to boost the percieved value of imaginary financial instruments. In other words, the value of REAL assets are being manipulated (oil, metals, etc) to strengthen the value of a certain currency. This also boosts the bubble that the wallstreet boys keep inflating while ZIRP gives the green light.
Yes, like and share mines are the most profitable.
No, copper/silver mines next
Robocop - I'd Buy That For a Dollar
https://www.youtube.com/watch?v=85cL1HisrNc
so will be only using solar now? My libturd naigbor wants to know!
I saw that on Ebay for 90 cents. I guess someone wanted it badly enough and forked over $1.00
Australia better quick get those BLS equations for unemployment or thier jobless rate will be in the double digits using those old-fangled equations where you actually count the people out of work.
Something tells me the one dollar sales price is for tax purposes only. I wonder what the real sale price was?
this is the catch: ...and merely had to fun(d)[sic] ongoing spending and any debt obligations.
...your casino loses money. maybe we can do better. [/michael corleone]
Usually a sale like that happens when you're buying debt.
No, the $1 is there for the CONSIDERATION so the sale is an enforcible contract.
In theory everytime you take on a credit obligation the salesman should give you
a dollar.I had a lawyer partner in a business,old school, and he insisted upon it when
we sold plant on credit..
This is incredible. The market gets flooded with oil under contrived circumstances combined with a massive uneven hand of environmental regulation levied against coal are being pushed global (verses fracking, clean water act etc) and now these real resources with real future value are getting picked off for nothing. Sounds legit.
I'm sure appropriate fees were paid to the banksters.
Ha, ha. Are you kidding? The phenomenal amount of MAL-INVESTMENT by the PINKO FASCIST COMMIES will be a de-leveraging sight to behold! These BRAINLESS BASTARDS have more or less destroyed the world economy. I pray that everyone responsible finds themself on the noose end of a long rope...
PINKO? Is that you Archie?
So let me guess, Goldman helped them float a bond for $630M which the players all pocketed and the new owner bought the mine for $1 + the assumption of $630M in bond debt.
Am I missing something?
This has to be bullshit. $1.?!? NO fucking way.
Someone has just been gifted a bloody fortune via an insider's deal if nothing else.
Where is the rest of the story?
Brand new Spanish airport costing well over a billion is now on the auction block for 11,000 bucks to a Chinese firm.
WHY are these valuable assets being given away to these persons/corporations?
Acreage alone is worth more than this if it isn't a completely unreclaimable enviro-disaster site.
You can be pretty sure that a schmidt load of debt/liabilities come along with that price.
edit
Leave it up to the Chinamen to fuck things up.
The preferred nomenclature is Asian-American.
"feel free to thank China."? No, thank Alan Greenspan, Ben Bernanke, Janet Yellen and all of those banks connected to them.....
Off with their heads!
Thank you Tyler(s)
http://www.vale.com/canada/en/business/mining/fertilizers/vale-fertilize...
Thank God, most economists have PhD's - just think of the mess we would be in if they only had B.S. degrees!....
Pretty sure a log of them have bs degrees as well.
Uhhh... ah, huh huh, he said log.
Is this an inconvenient time to point out that under a real money standard and actual rule of law that the level of malinvestment, war, debt, size of government, empire, etc etc would be impossible. Finite resources on a finite world do not match up well with infinite currency.
WTF isn't Japan jumping feet first into coal fired electricity?
It's a coking coal mine, i.e. the type of coal used in blast furnaces in making iron.
The ignorant do not understand that there are tremendous differences in grades of coal.
Anthracite: nearly pure carbon, burns 92-98% clean.
to
Bituminous: 60-80% carbon- burns dirty.
Carbon is evil! EVIL! There is no 'pure' carbon! The Chinese are importing Beelzebub's pet rock! 'Hell' is just a burning carbon mine!
You heard it here first.
Burns clean!?!?! Clean!?!?!
Don't you know burning Anthracite exhausts mostly CO2?!?!
CO2!!!! The evilest of EVIL molecules on this here spinning rock.
Lol- according to the Goracle.
Another straight forward case of oversupply. Put another way, the resource available that can be economically extracted today, is both easy to access, but resultant supply is far too large even for China's steel needs to consume it. The smart thing to do is reduce production, to keep it sustainable and startup debt (otherwise known as a "great investment opportunity") low. But the greed to sell more, and to get short term higher bonus, always wins the contest over sustainment and prudence. Who wants to be a prude?
Wind farms will be the next coal pits...
Stand in amazement at what we have accomplishment
With no skills other than what we stemmed from: grave-robbery, treachery, thievery, buggery, counterfeiting.
We own global money printing
And now we are buying everything
Everything
All human souls belong to us
Forever
And once we get the Americans to surrender their guns
We have another massive slaughter in store.
-Your Talmudic Overlords
Moron or lying ass .. not sure which the author is.
The commodity bubble had nothing t do with China (other than the fact that the Chinese were suckered into it as well).
The commodity bubble was solely caused by the banks, who control price. Miners and consumers of commodities are at the mercy of bank central pricing policy and because of that must use banks to hedge the value of their production... and who sells them the hedges? The banks of course.
There is no free market in fiat land.
Your Chinese masters must pay you well. They are known to be generous with their fiat that they print like toilet paper.
Oh Dindu,
If the Chinese print renminbi like toilet paper, the US creates dollars like the shit of the entire class of Aves.
Oh no. You've got a smidgen of bird poop in your hair. Let me get it out for you. (takes dirty handkerchief out of pocket)
...he is an obvious japanese troll.
but why, then, the name of a dark 'untouchable'?
I got soul, baby.
That's winning, Obama Style.
"Under my plan, electricty rates would necessarily skyrocket."
EPA regulations will put many coal operations out of business and you will pay even more.
Just wait for the NG decline rates to really kick in.
I could probably go $2 for that.
We have a winner. I would have gone five at the very least.
Why were we not invited to the auction or more importantly the citizen Aussies? You know I nearly won a liquer license in Billings MT once and I wasn't even a resident of that city. They have raffles for a portion of these licenses. I came in 2nd place for the liquor license and 3rd for the beer license. I didn't win but I thought that was pretty cool that the city did that. It's like old school public television but for booze.
It's just like George Carlin said "it's a big club and you aint in it".
Obvious result.
Ship all manufacturing to China. Lose a bunch of good jobs. Lower interest rates. People borrow. Inflation keeps on rising in spite of crap being made cheaper, because, greed. People buy less. Lower interest rates. People keep going deeper in debt, buy less. Profits must increase, lay off more workers. By now, China sells less to buried in debt, jobless. Even raw resources to make cheap crap is not needed. Lower interest rates. No good. Lay off more workers, no good.
Lower profit expectations? When everyone is unemployed, starving, rioting and or dead,...... maybe.
30 billion yen is not anywhere close to $11 million.
Well fuck me. Last week coal problems were all Obama's fault.
http://www.zerohedge.com/news/2015-07-25/furious-coal-ceo-lets-it-all-ou...
This week it's China's fault.
Who to believe, who to believe.
If this keeps up, soon I'm gonna have to start thinking for myself.
Your being given multiple viewpoints from which to decide, it could be worse, you could be one of the 6 CNN viewers.... just sayin.
I wasn't complaining. I was just having a laugh.
That's really really funny Missy! can't remember seeing your comment on GW's latest post which is a must read.
It's like OK we didn't get the mandate to bomb the eff out of Syria so we'll use ISIS as a proxy and siphon off the crude for now.
That these EVIL TWISTED BarStewards ( am gritting my teeth when attempting to clean up my act for a lady; is this overly politically correct, i wonder? ) with ZERO consideration are willing to displace Millions, indirectly through several proxies ( ISIL, AlciaD'uh, Nusrah and other moderate free savages ) kill/wound hundreds of thousands for black gold beggars belief.
One Sociopath's loss is another Sociopath's gain. It's only on the Sociopath's death bed when the fires of hell beckon that a modicum of truth manifests itself, moreover the sham scam that is the RBA , BOE and FED RES correlates with the total devoid in intellect of leadership within the corresponding countries with Abbott, Cameron and Obama foisted upon us, inflicting a perfect coup de grace on the United States of Sheeple by the Cabal.
and then there's this
The Aussie Commodity boom was a life time event - the association with the USA Will destroy Australia values - too many Cheaper and more secure countries - the french will prove to be the watershed on the Mistral deal for everyone to assume there are no contracts in th face of US pressure
if you include all the equipment, I'll pay double.
Agreed, but it all should have been at auction for every asset. 1$ would buy you more headache then it is worth with this bullshit. The mine is still there though so there is that. There will be evironmental clean-up fees/taxes for sure at that mine.
When you open up the books the debts they took on will be immense but you'll most likely find that it's a bankruptcy scam and a few of the directors/creditors have an interest in the new Vehicle. Probably RBA like the Fed Res in the USSofA have a vested interest ( in their portfolio of equities ). Last shutting down a mining operation to reopen again at a later date is mighty expensive. PS. With Barry kowtowing to more Russian sanctions i'd lurv to see China Fcuk the OZ economy or at least use their weight in getting NATO to back off.
The real sale price is $1+ total debt and other obligations. My guess is that comes pretty close to the market value, maybe even $630 million.
However if there is a way not to be personally on the hook for the debt other obligations then I'd take a chance running a coal mine for $1.
Nice to see another Japanese company make good as with the spike in oil imports due to FuckyouShiela can be offset somewhat with the increased coal imports . . oh wait . . my bad . . nevermind.
Unfortunately, the deflation pressure continues, gold and silver mines will follow the same fate. However, these retard politicians and investors better realise once a mine is shut down, it will take years to restart. More likely they will be left as ghost mines.
Economics 101. It's all about supply and demand. Supply from communist or semi communist countries that overrides the delicate equilibrium of the two always results in a reduction in demand from countries that have civilizations with a cost of living based on the previous situation. Classic example of a non level playing field resulting in demand drop off from consumers. Shit even Henry Ford understood that.