By Kishori Krishnan Exclusive To Coal Investing News Share

It’s going a-begging. The coal-mining lease sale by the state of Montana has not received any viable bids, though coal mining giant Arch Coal Inc has said it might be interested, at a lower price point.

The years-long effort to develop a coal mine in the Otter Creek Valley has come to nought. The Schweitzer administration was eyeing revenues and bonus bid (an up-front payment) to the tune of 25 cents a ton, which could have pegged the coal at around $142.5 million.

Though Arch Coal did not submit a certain bid saying Montana’s minimum requirement was too expensive for the current economic climate, the submission of interest itself has sparked a controversy.

Arch Coal (NYSE:ACI) was Monday’s worst performing stocks, down 1.7 per cent to $20.72.

Ark Land Co, a subsidiary of St Louis-based Arch Coal, on Monday sent officials a note on the likely mining of the state-owned coal in the valley 150 miles east of Billings.

The brief statement from Ark Land said the bid for 25 cents per ton, with royalties, was too high. Royalties are payments to the coal owner when mining occurs, as a percentage of the coal’s market price.

The land board voted to put the land up for bid in December saying as much as 500 million tons of coal could be mined. The area is south of Ashland near the Wyoming line.

However, environmentalists have been playing spoilsport with their statements that developing the coal will pump 1 billion tons of greenhouse gas into the environment.

The state’s Otter Creek coal is interspersed with 730 million tons of coal owned by Great Northern Properties, which leased its coal to Arch Coal in November. Arch agreed to pay Great Northern a bonus bid of 10 cents a ton, or $73 million, spread over five years.

Another supposed renegement came in from Queensland billionaire Clive Palmer, who has refuted claims that he signed a $60 billion export coal contract with a Chinese group.

On the weekend, Australia-based Resourcehouse said in a statement that it had closed a A$ 69.4 billion deal to supply coal to China Power International over 20 years. “This deal is Australia’s biggest export contract,” Palmer had said in the weekend release. The contract involved Resourcehouse’s proposed China First coal mine and infrastructure project in Queensland.

Billionaire Palmer’s proposal to ship coal to China, from near the tiny town of Alpha, within four years, met with stiff resistance.

Barcaldine Regional Mayor said Alpha’s infrastructure was ill-equipped to cope with the plan.

That was by no means the end of the story. On Monday, China Power International Development, a major electric company, issued a statement denying it had agreed to a 20-year plan to buy coal from Palmer’s Australian mining company Resourcehouse Ltd.

A move which stumped everyone since the 20-year coal export contract and the $8 billion mine construction deal was set to create 6000 jobs.

However, Brisbane-based Resource-house confirmed that the Export-Import Bank of China had agreed to lend finance for the project, contributing US$ 5.6 billion of the estimated US$ 8 billion development cost.

Then, China’s Xinhua news agency ran a report that the price negotiations between CPI and Palmer’s Resourcehouse “are yet to get underway”.

The backtracking then moved into full force. Palmer corrected his statement terming the deal an “estimate.” Palmer also corrected another error: stating that the agreement was not entered with China Power International Development, but with China Power International Holding Ltd (2380.HK).

Incidentally, China is the world’s largest producer and user of coal, and last year became a net importer of the fuel, which provides two-thirds of its energy needs.

Australia already is the largest supplier of coal to China. Of the 125.8 million tonnes of coal imported by China in 2009, 43.9 million came from Australia.

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