Singapore-based commodity trader Noble Group Ltd. (N21.SG) will release capital from its majority-owned subsidiary Gloucester Coal Ltd. (GCL.AU) through a deal to transfer its stake in Queensland's Middlemount coal mine to the Australian company.

The deal should reduce Noble's stake in Gloucester to around 61%-63% from its current 87.7%, while simultaneously significantly raising Gloucester's profile as an Australian coal miner.

"Noble's interest is not to be an owner of coal mines, it's to have a strong market for its products," said a Gloucester spokesman.

"This will dilute Noble very, very significantly and make Gloucester into the leading metallurgical coal company in Australia."

Under the deal, Gloucester will raise at least A$410 million of new equity at A$9.25 a share and issue A$100 million of stock to Noble, while receiving Noble's 30% equity and royalty interests in Middlemount, a coking coal mine in Queensland's Bowen Basin.

The mine is tipped to produce 1.8 million metric tons of unprocessed coal per year after production begins later this year.

The combination of Middlemount and Gloucester's existing assets should raise saleable coal production to around 5 million tons a year by 2014, the company said in a presentation, making it one of Australia's leading coking coal producers.

The deal would also allow Noble to release capital by diluting its stake in Gloucester, a move that fits the trader's long-term strategy in spite of its outstanding A$12.60-a-share offer to acquire the 12.3% of the company it doesn't already own.

Noble has consistently said that it wants only strategic minority stakes in Australian coal companies, viewing itself as a trader which can benefit from a seat at the table rather than a miner seeking control of its assets.

"You can't go down from nearly 90% to nearly 50% without looking like you're deserting the company," said one person with knowledge of the companies' strategy. "By vending other assets Noble can gradually dilute themselves out."

Noble, Gloucester and Middlemount's 70% majority owner Macarthur Coal Ltd. (MCC.AU) have been involved in a complex tussle over their Australian coal assets for months.

Earlier in the year, Macarthur attempted to take over Gloucester and acquire Noble's stake in Middlemount, in return for offering Noble a portion of its own equity.

After the collapse of that deal, Noble made an offer for the remaining 12.3% of Gloucester, which the person with knowledge of the company characterised as a defensive move designed to underpin Gloucester's market price.

Macarthur also was the subject of abortive takeover bids earlier this year from New Hope Corp. Ltd. (NHC.AU) and Peabody Energy Corp. (BTU).

Australia is the world's largest coal exporter and a key supplier of Asian steelmakers and power stations, and its coal companies have been the subject of vigorous acquisitive interest of late.

Banpu PCL (BANPU.TH) last month launched a takeover of Centennial Coal Co. Ltd. (CEY.AU) and Linc Energy Ltd. (LNC.AU) yesterday sold its Galilee thermal coal operation to India's Adani Enterprises Ltd. (512599.BY), while Anglo American PLC (AAL.LN) last month sold its local coal assets to a consortium led by major Korean consumers.

The Middlemount interests Gloucester will acquire from Noble are valued at A$437.5 million, consisting of a 27.52% direct stake--valued at A$269.5 million--plus Noble's right to royalties from Middlemount's coal sales, which is set to 4% of the sale value of loaded coal at Australian ports.

Gloucester is separately acquiring Noble's option to buy 2.48% of Middlemount from Macarthur for A$8 million, and an option to spend A$100 million in the next 18 months to buy a further 20% stake from Macarthur.

Those options would bring Gloucester's overall holding in Middlemount to 50%.

Gloucester will fund the spending through A$337.5 million from the capital raising and A$100 million in stock issued to Noble.

Gloucester said that around A$410 million of its capital raising was already underwritten by institutions and that retail investors may subscribe for a further A$45 million.

It may also raise a further A$90 million through an additional institutional placement, the company said.

Noble, which is not participating in the equity raising, would likely see its stake reduced to 57%-59% if the additional placement went ahead, Gloucester said.

-By David Fickling, Dow Jones Newswires; +61 2 8272 4689; david.fickling@dowjones.com

(Gaurav Raghuvanshi in Singapore contributed to this article)
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