UPDATE: Posco, Kepco Bid For Anglo American Coal Assets -Sources

A South Korean consortium of Posco (005490.SE) and Korea Electric Power Corp. (015760.SE), known as Kepco, is bidding for two Australian coal assets being sold by Anglo American PLC (AAL.LN), people familiar with the matter said.

Posco, the world's fourth-largest steelmaker by output, and state-run Kepco are bidding for the Bylong and Sutton Forest exploration assets in the Sydney Basin of New South Wales state, said the people, declining to be named.

The move shows that North Asian steelmakers and power generators are continuing to bid aggressively for overseas coal assets that have access to infrastructure such as ports, from where mined volumes can be shipped home to meet booming demand.

It also demonstrates that neither a 40% mining profits tax proposed by Australia's governing Labor Party nor a sharp increase in the valuations of local coal assets over the past year are deterring interest from buyers.

"A consortium of Kepco and Posco is bidding for the coal assets" but the outcome of the auction isn't known yet, said a Seoul-based Kepco official, declining to be named.

Choi Doo-jin, a spokesman for Posco, said, "We are looking at several opportunities for a stable supply of raw materials and this is one of them.

A spokesman for Anglo American declined to comment.

Bylong has total resources of 420 million metric tons of low-ash thermal coal--used for power generation--that could be extracted via open-cut and underground mines, according to a flyer for the sale issued by Anglo American earlier this year.

Sutton Forest is a smaller asset with an estimated 115 million tons of coal, but is attractive because it could produce both thermal coal and metallurgical coal, used in steelmaking.

Both assets are relatively close to railways leading to export terminals on the coast--Sutton Forest is near Port Kembla and Bylong is within reach of the port of Newcastle.

Anglo American is selling the assets because they do not form part of its growth plans in the short-to-medium term. The company's existing Australian coal mining operations are not affected by its decision to sell exploration projects.

Goldman Sachs JBWere is advising Anglo American on the sales process. It wasn't known how much Posco and Kepco are bidding for each asset, or other financial terms.

State-owned Korean energy companies including Kepco have invested a combined $4.5 billion last year in overseas resources companies and energy development projects, bringing total spending over the past 10 years to $9.48 billion, South Korea's Ministry of Strategy and Finance said June 28.

These companies plan to expand investment this year to enhance the country's energy self-sufficiency, the ministry said, without providing a precise target.

On Thursday, Korea's SK Group said it would spend $14 billion on the expansion of its operations by 2020, including acquisitions of natural resources overseas.

Korean companies often form consortiums to bid for exploration assets in order to pool finances and share risk.

Posco's self-sufficiency ratio for key raw materials including coal currently stands around 20%, well below its bigger rival ArcelorMittal's (MT) 46%. It aims to raise the ratio to more than 50% by 2014.

-By David Winning, Dow Jones Newswires; +61-2-82724688; david.winning@dowjones.com

(Kyong-Ae Choi in Seoul contributed to this article)

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