2nd UPDATE: Miners Offer A$4.85 Billion For Queensland Rail's Coal Track Network

A consortium of mining companies on Wednesday unveiled a A$4.85 billion bid for Queensland Rail's coal rail track network, which is owned by the state government.

The Queensland Coal Industry Rail Group, made up of 13 mining companies, including BHP Billiton Ltd. (BHP) and Rio Tinto Plc (RTP), is pitching its offer as a superior alternative to the state government's plans for a A$3 billion public float of all of Queensland Rail's coal and freight assets.

The other coal producers that have signed up to provide equity for the offer are Anglo American Plc (AAL.LN), Xstrata Plc (XTA.LN), Ensham Resources, Felix Resources Ltd., Jellinbah Resources, Macarthur Coal Ltd. (MCC.AU), Peabody Energy Corp. (BTU), Vale S.A. (VALE), and Wesfarmers Ltd. (WES.AU).

QCIRG, which is chaired by former New South Wales state premier Nick Greiner, said the consortium's offer is fully funded and represents a substantial premium to what is likely to be achieved via an initial public offering as well as to what has been paid in recent comparable transactions.

"Importantly, our offer is able to be settled with the government prior to the IPO and will not be dependent on volatile equity markets, removing major risk for the state while also providing early settlement," Greiner said in a statement.

The state government in March appointed five banks--Credit Suisse, Goldman Sachs JBWere, Merrill Lynch, RBS Morgans and UBS--to lead manage the IPO that is expected to be Australia's largest this year.

Greiner said the mining companies, as the "natural buyers", are able to pay more for the business, and would also invest more in the maintenance of the infrastructure, than the fund managers and individual investors that would own the network after an IPO.

Greiner said that while due diligence is needed to "firm up" the offer price, the final price isn't likely to change much and the consortium members believe they could complete the offer in about three months.

The bid won't be impacted by the outcome of the current heated debate between the resources industry and Australian government over the government's planned new 40% Resource Super Profits Tax, he said. Some miners have put projects on hold in Australia due to uncertainty over the impact of the tax.

The QCIRG offer excludes Queensland Rail's above-rail rolling stock assets and its freight business.

The miners aren't the natural buyers of the above-rail assets and will cooperate with the state government's plans to sell that part of Queensland Rail, whichever way the government decides to proceed, whether by IPO or trade sale, Greiner said.

Greiner said there are trade buyers who are interested in the above-rail assets, while an IPO would also be successful.

He said the above-rail assets alone are likely to sell for more than A$2 billion, adding to the A$4.85 billion the government would receive under the miners' offer for the track network.

"If you put the two together, it is perfectly obvious they get a better outcome in terms of cash now and in terms of cash in the future under this proposal than they would under the IPO," Greiner told journalists on a conference call.

QCIRG said Aquila Resources Ltd. (AQA.AU) and New Hope Corp. (NHC.AU) are "supporting parties" to the offer and have the opportunity to provide equity at a later stage.

Greiner said QCIRG has secured an acquisition facility of A$1.35 billion, which is underwritten by ANZ, BNP Paribas and Citibank N.A., as well as a committed capex facility of more than A$2.05 billion to fund the current Queensland Rail capital plan and "catch-up" maintenance.

"The members of QCIRG are committed to expanding the network to support future growth and in addition to the offer, QCIRG has established a facility to fund the current QR capital plan and also further rail capacity growth," he said.

The mining consortium is being advised by Citi.

-By Rebecca Thurlow, Dow Jones Newswires; 61-2-8272-4679; [e-mail]