Lanco may sell Collie mine share

Griffin Coal’s owner, Indian energy company Lanco Intratech, is reportedly looking to sell a stake in the Collie mine in a bid to bed down debt and fund ambitious plans for expansion at Muja South.

In an admission of its struggles in the South West, Lanco chairman L. Madhusudhan Rao told Indian media Lanco was ‘‘not averse’’ to selling a majority stake in Griffin.

Lanco bought the debt-ridden Griffin coal mine from administrators in 2010 following the collapse of Ric Stowe’s empire and has since launched an ambitious plan to expand its Collie operations.

Lanco plans to quadruple coal production, to between 17 and 20 million tonnes a year, at its Collie mine by 2015, shelling out a capital investment of between $800 million and $1 billion.

The mine’s expansion is a key to Lanco’s plans to export up to 12 million tonnes of coal a year through the Bunbury Port to its power stations in India, where fuel is in high demand.

‘‘The company is in the early exploratory stages of determining ways to fund the Muja South expansion,’’ a Perth-based spokesman for Lanco said.

‘‘As part of that process the company is currently seeking to appoint advisers to help them consider all the options.’’

While Lanco’s share price has recovered in recent weeks, Griffin continues to face the challenge of low coal prices and high production costs.

The company has the cloud of Perdaman Chemical and Fertilisers’ $3.8 billion lawsuit, expected to go to court early next year, hanging over its head.

Perdaman claims Lanco reneged on a deal to supply its planned urea plant in Collie with coal.

If Perdaman is successful the claim could bankrupt Lanco, leaving the future of Griffin’s Collie operations and more than 450 employees in doubt.

Lanco has since lodged a counter claim with the WA Supreme Court.

The challenges facing Collie’s coal industry were underscored by ColliePreston MLA Mick Murray last week who said he did not know how much longer the town’s two coal mines could sustain continued financial losses.

Mr Murray said he was ‘‘seriously concerned’’ the tonnage price of coal paid under WA’s supply agreements was not enough.