The auction of a majority stake in the A$1 billion-valued Revuboe River coking coal deposit in Mozambique will reach a critical phase this week, with around four global miners likely given the green light to weigh final offers, a person familiar with the matter said Monday.

A deadline for final bids has been set for the first week of October, with the sale process of the controlling 58.9% stake held by Talbot Group Investments due to be completed by the end of the year, the person said.

Talbot Group is selling all its assets, including the stake in Revuboe, following the death of founder Ken Talbot in an air crash in Africa last year.

Revuboe is a 1.4 billion metric ton coking and thermal coal deposit in the fast-growing Tete coal province in central-western Mozambique. The joint venture, which includes Japan's Nippon Steel Corp. (5401.TO) and South Korea's Posco (005490.SE), hopes to start production of up to 17 million tons of coking and thermal coal from September 2013.

Steelmakers Nippon Steel and Posco have first refusal on acquiring the Talbot Group's stake once final bids have been received.

The sale comes at a time of intensifying deal flow in the coal sector as rapid industrialization in China and India drives up demand for coking coal used in steelmaking and thermal coal burnt to generate power. Four of the largest mining-sector deals over the first six months of this year involved coking coal, with the $19 billion in deals done so far this year not far behind the $22 billion achieved during the whole of 2010, according to PricewaterhouseCoopers.

Coking coal is far more scarce than thermal coal, making it a key target for miners keen to lock up resources that can be shipped to Asian steel mills. High-quality coking coal deposits are mostly confined to a few regions of Australia, Colombia, North America, Russia, Mongolia and Mozambique.

Based on multiples achieved when Rio Tinto PLC (RIO) acquired Riversdale Mining Ltd. for A$3.9 billion earlier this year, the neighboring Revuboe deposit could fetch around A$1.02 billion. That would put a valuation on the Talbot Group's stake around A$600 million.

A spokesperson for Talbot Group wasn't immediately available to comment.

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

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