FILE PHOTO: A sign adorns the building where mining company Rio Tinto has their office in Perth, Western Australia
JOHANNESBURG - South32 is studying a potential bid for Rio Tinto Group’s A$2 billion (R21.3bn) coking coal portfolio, people familiar with the matter said, as it seeks to take advantage of surging prices for the steel making ingredient. 

The Perth-based company is working with an adviser as it weighs an offer for Rio Tinto’s Hail Creek and Kestrel mines in Australia, according to the people. 

It could face competition from suitors including Whitehaven Coal, which is also considering a bid, the people said, asking not to be identified because the information is private.

Rio Tinto distributed preliminary information on the assets to potential buyers earlier this month and has asked for indicative bids by early December, the people said. 

The company is also gauging buyer interest for its Valeria and Winchester South coal projects in Queensland state, one of the people said. South32’s coking coal output tumbled by two-thirds in the three months to September 30 after operations at an Australian mine were halted. 

Output in part of the Illawarra operations resumed this month, though production will be lower than previously expected over at least the next two years, RBC Capital Markets said on Thursday. Coking coal prices have more than doubled since the start of last year.

Chief executive Graham Kerr, who has said he wants to boost production of the commodity, in April dropped the purchase of a Peabody Energy coking coal mine. 

- BLOOMBERG