Australia's Whitehaven to Buy Two BHP, Mitsubishi Coal Mines -- 2nd Update
By Rhiannon Hoyle
Mining giant BHP Group and Japan's Mitsubishi have agreed to
sell two jointly owned steelmaking coal mines in Australia to
Whitehaven Coal for up to $4.1 billion in cash.
The world's biggest miner by market value said earlier this year
the joint venture was seeking a buyer for its Blackwater and Daunia
mines in the Bowen Basin of Australia's coal-rich Queensland state.
The BHP Mitsubishi Alliance, Australia's largest producer and
exporter of metallurgical coal, is narrowing its focus on
high-quality coal it expects steel mills will increasingly buy to
help curb their carbon emissions.
The deal announced Wednesday includes $2.1 billion cash on
completion plus another $1.1 billion over the following three
years. There's also the potential for up to $900 million in
price-linked payments over three years if coal sales are above
agreed price thresholds.
Whitehaven will take on all current and future environmental
liabilities and rehabilitation obligations when the sale is
completed, BHP said.
The Blackwater and Daunia mines produce millions of metric tons
each year of mostly metallurgical coal for steel that is shipped
mainly to buyers across Asia. The Blackwater mine, opened in 1967,
is one of the longest coal mines in the Southern Hemisphere.
The mines produce lower-quality coal than some of the joint
venture's other operations and BHP previously said those two mines
would struggle to compete for future investment. "What we are doing
here is further concentrating our portfolio on the best-of-the-best
assets," BHP Chief Executive Mike Henry said in February.
Whitehaven said the deal will be transformational for the
Sydney-based coal company, helping to increase exposure to
steelmaking coal versus coal used to generate electricity. It said
it is considering the sale of a minority interest to global steel
producers that would help pay for the deal.
"Daunia and Blackwater produce much-needed metallurgical coal
that is in high demand across Asia," said Whitehaven Chief
Executive Paul Flynn.
BHP last year sold its controlling interest in two other mines
to Stanmore Resources in a roughly $1.35 billion deal. It also sold
a minority interest in a Colombian mine to Swiss commodities giant
BHP sought to sell its last thermal-coal mine, the Mt. Arthur
coal operation in Australia, but failed to secure a buyer. Last
year, BHP said it would instead keep mining the pit for several
years before closing it and beginning rehabilitation work.
The world's top miner has been pivoting toward commodities it
expects to enjoy higher demand amid a global energy transition,
especially industrial metals copper and nickel, and fertilizer
BHP bought Australian copper miner OZ Minerals in May in what
was its biggest acquisition in more than a decade. Before that, it
struck a deal with Australia's Woodside Energy to offload its
global petroleum business.
Still, coal remains an important money-spinner for the mining
giant. BHP's coal interests contributed 18% of the group's
underlying Ebitda in the year through June, with a margin of
BHP says it believes high-quality metallurgical coal will be
needed to fuel blast furnaces in the steel industry for decades to
come, underpinned by growth in steelmaking in countries such as
India, which--unlike China--relies on imports of steelmaking
"In line with our long-term strategy, we will continue to
develop our high-quality metallurgical coal assets in Queensland,
which are sought after by global steelmakers and needed to support
the energy transition," BHP said in a statement on Wednesday.
BHP said profits from the sale will go toward reducing net debt.
The deal is expected to be completed in the quarter ended June 30,
2024, it said.
Earlier Wednesday, BHP reported a 16% fall in first-quarter
metallurgical coal output compared with the same period a year
earlier. It said that was in part due to planned plant
The miner also reported lower iron-ore production but higher
copper output, and said it is on track to meet fiscal-year
production and cost estimates set for all its operations.
Write to Rhiannon Hoyle at firstname.lastname@example.org
(END) Dow Jones Newswires
October 18, 2023 00:09 ET (04:09 GMT)
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