China to Buy Occidental’s Stake in Mine

China has agreed to buy Occidental Petroleum Corp.’s 25% stake in the An Tai Bao coal mine and pay off the mine’s large foreign debt, a source close to the deal said Monday.

The $750-million mine, the largest joint venture between China and a foreign company, was a pet project of the late Occidental Chairman Armand Hammer. Since his death last year at 92, the energy, chemicals and meatpacking concern has been getting out of many undertakings in which Hammer had a special interest.

Separately, Occidental announced that it is beginning a major oil search in the Sahara Desert in Algeria.

In reaction to the news, Occidental stock rose $1.375 to $22.625 on the New York Stock Exchange.

Extricating Occidental from the coal mine is part of a corporate make-over launched by Hammer’s successor, Ray R. Irani.

The sale of Occidental’s North Sea oil and gas interests for $1.5 billion is part of an effort to slice $3 billion of the company’s more than $8-billion debt.

Irani announced the joint agreement with the Algerian national oil company to explore the 5.7-million-acre Djemma Touggourt area.

The three-year exploration will include seismic tests that begin immediately and four exploratory wells, the first to be drilled next year. It’s the first time that a U.S. company has signed a production-sharing agreement in the under-explored, productive Melhrir Trough, Irani said.

“The acquisition of this block fits Occidental’s strategy to explore in known oil-bearing areas which have the potential for large discoveries,” he said.

Occidental declined comment on China’s decision to buy Occidental’s stake in the An Tai Bao mine and pay off the project’s $200-million debt.

The Wall Street Journal quoted bankers familiar with the situation as saying that Island Creek of China Coal Ltd., a 50-50 venture between Occidental and Bank of China, told creditors that it will retire its debt this month. Island Creek controls 50% of the mine.

Prepaying the debt, which is owed to a syndicate of 41 banks in Hong Kong, would bolster the confidence of overseas investors in China at a time when many banks are having trouble persuading Beijing to take responsibility for problem debts.