New Delhi : Coal India, the world's largest producer of the fuel, is studying the acquisition of five mines in the US, Australia and Indonesia to meet the country's demand for the fuel, Chairman Partha Bhattacharyya said.

The state-owned company is examining a mine in Australia owned by Peabody Energy, one in the US owned by Massey Energy and another in Indonesia, Bhattacharyya said, dec-lining to name the third company. While Coal India hasn't started due diligence on two more mines in Australia, it may appoint banks soon to examine offers, he said.

"Of the three, we are narrowing the gap of valuations with Peabody," Bhattacharyya said in an interview in New Delhi yesterday. "We would like to invest because there are companies which want money for their mines or a market for their coal," he said. "We have the money and there is a big market here."

The Kolkata-based mining company has Rs380.5 billion (Dh30.4 billion or $8.3 billion) in cash for acquisitions as consumption rises in Asia's second-biggest energy consumer. India's annual coal demand will exceed output by 100 million metric tonnes in four years and Coal India aims to meet half the shortfall from overseas mines, the chairman said.

"It's absolutely critical not just for the company but also for the country," said Jagannadham Thunuguntla, chief strategist at SMC Global Securities in New Delhi.

"From a macro-economic standpoint, it is very important for India to have control over natural resources and Coal India is a trump card for the government."

Indonesia venture

Bhattacharyya said Coal India may also begin talks with the Indonesian government in January on a proposed venture with state-owned miner PT Tambang Batubara Bukit Asam.

At the last meeting of an Indonesia-India working group "we had suggested Bukit Asam is a government-owned company, and if certain blocks can be operated jointly by forming a venture," he said. "They have said in the next meeting they will bring up something. That's likely to be in January."

Coal India fell 0.4 per cent to Rs312.10 at 9.26am in Mumbai trading, compared with a 0.3 per cent gain in the benchmark Sensitive Index. The stock has gained 27 per cent since the government sold a 10 per cent stake in the company at Rs245 each last month in India's largest initial share sale.

Of 20 analysts that cover Coal India, 16 recommend buying the stock and one recommends selling.

Strong demand

Prime Minister Manmohan Singh raised Rs152 billion from the IPO in October, offering the stock at a discount to global peers. India's economy grew at the fastest pace in more than two years in the three months ended June 30, spurring energy demand.

Coal India and its units, which account for 82 per cent of the nation's production of the fuel, posted a 29 per cent increase in net income to Rs40.2 billion in the six months ended September 30, the miner said November 23. The miner has Rs17.1 billion of loans outstanding, payable through 2044, according to Bloomberg data.

"Coal asset prices may go up in future because of rising demand from India and environmental constraints, which are likely to hamper production," said K.K. Mital, a New Delhi- based fund manager with Globe Capital Market Ltd.

"So, now is the right time for Coal India to make these acquisitions, if they come at the right price."