April 14, 2011

White Energy Ends A$500 Mln Cascade Coal Acquisition Bid

SYDNEY (Dow Jones)--

White Energy Co. (WEC.AU) has decided to cancel a planned A500 million (US$522 million) acquisition of two coal projects in New South Wales, after environmental objections raised uncertainty over the direction of the deal.

White Energy said the acquisition of Cascade Coal Pty Ltd, which is 60.1% owned by five White Energy directors, had "a degree of uncertainty" while experts were consulting on the impact of project development on local farmers and water tables.

The cancellation raises questions about the prospects for major resource development in the world's largest coal exporter, amid growing conflict between mining companies and local farming groups over developing coal and gas.

"There's been a lot of pushback from the community up there," said a person familiar with the proposed deal, who didn't wish to be named. "Getting a mining license up in today's environment is a lot more difficult than it was even 12 months ago."

Craig Shaw, a spokesman for the Bylong Valley Protection Alliance, a group campaigning against the development of Cascade's Mt Penny project, welcomed the decision.
 

"It's a surprising and welcome development. The scotching of this transaction means that the immediate imperative to development has been pulled away."

Australia is the world's largest coal exporter and the fourth-largest exporter of liquefied natural gas, with many analysts arguing that it could become the world's largest LNG exporter by 2020 on the back of coal-seam gas developments in farming areas in New South Wales and Queensland states.

Hunter Valley in New South Wales is the world's dominant producer of the thermal coal used in power stations, with the port of Newcastle closest to the Mt Penny site having a current annual capacity of 143 million tons.

But the coalition state government elected last month has signaled it would take a tougher line than the previous Labor administration on the issue of resource development, and promised a review of some exploration licenses granted under the previous government.

White Energy said the acquisition bid had been terminated by mutual agreement with Cascade, after the Cascade directors not associated with White Energy failed to come to an agreement on how several consultations on the environmental, social and agricultural impact of the deal would affect the transaction.

"The committee believes it is appropriate and in the best interests of White Energy shareholders to wait until there is greater certainty in relation to (these) issues," the company said in a statement. White Energy added that it could revisit the offer if development consent is achieved.

"(White Energy directors) had to go back to Cascade shareholders and say, "There are concerns from our own shareholder base about the transaction," the person familiar with the deal said, adding that the directors needed to provide assurances to White Energy shareholders on certainty.

Conflicts between farmers and resource companies in Australia have grown in recent years with coal and coal-seam gas explorers expanding operations in regions such as the Gunnedah Basin of New South Wales, the Bowen and Surat Basins of neighbouring Queensland state, and the Bylong Valley where Cascade's assets are located. Farmers fear that coal development could diminish or pollute underground aquifers.

Several politicians, including the Green party which holds the balance of power in Australia's Senate, and Tony Windsor, an independent who helps the minority Labor government win votes in the country's House of Representatives, have backed their concerns. 

-By David Fickling, Dow Jones Newswires;  david.fickling@dowjones.com

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