Australian coal explorer Bandanna Energy Ltd. (BND.AU) said Wednesday that it scrapped a formal asset sales process managed by UBS AG, a move highlighting that the merger-and-acquisitions boom in Australia's coal sector isn't boundless.

Bandanna, which simultaneously announced a resource upgrade, said it will continue talking informally to third parties that may be interested in buying individual assets. The failure of the drawn-out, formal sales process is a further blow to Bandanna, which last month said it was no longer actively pursuing full takeover bids for the company.

Recent deals in Australia's coal sector, like the takeovers of Macarthur Coal Ltd. (MCC.AU) and Gloucester Coal Ltd. (GCL.AU), have centred on companies that already possess producing assets with clear port and rail access, and which don't require piles of cash to develop their resources for export to fast-growing Asian economies such as China.

Bandanna's tenements in Queensland state's coal-rich Bowen and Galilee Basins have a current resource of over 1.6 billion metric tons of thermal coal used in electricity generation, and pulverised coal that is involved in the steelmaking process.

The company already has an allocation for 4 million tons a year of port access at the planned Wiggins Island Coal Export Terminal, which would allow it to ship from the Bowen Basin in early 2014. However, Bandanna recently failed to gain preferred status for a new port allocation at Abbott Point, setting back its Galilee Basin prospects.

"Interest by a number of third parties, particularly in joint venture participation in key Bowen Basin projects, will continue via discussions outside of that formal, competitive, process," the company said in Wednesday's statement.

The company's shares have fallen about 71% since peaking in July amid signs the UBS-managed formal strategic review wouldn't produce a deal. They outperformed the broader market Wednesday, rising 3.3% in early trade to 63 cents, after it said its total measured, indicated and inferred resources had risen to about 1.62 billion metric tons from 1.53 billion tons in July.

"This inventory positions Bandanna as one of the largest thermal coal explorers listed on the Australian Stock Exchange," it said, adding that the Wiggins Island port allocation gives it a "clear pathway to significant coal production commencing in 2014".

Sydney-based Bandanna's main near-term project is Dingo West, which aims to produce up to 1 million metric tons annually of pulverized coking coal.

Rival Australian miner Whitehaven Coal Ltd. (WHC.AU) announced in May that it was closing a six-month bid assessment process, concluding that "no proposal is sufficiently attractive to warrant recommendation".

-By Ross Kelly, Dow Jones Newswires; 61-2-8272-4692; Ross.Kelly@dowjones.com

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