BHP to Sell Metallurgical Coal JV Stake to Stanmore for Up to $1.35 Billion
By Rhiannon Hoyle
BHP Group Ltd. said it will sell its controlling interest in two
metallurgical coal mines to Australian coal miner Stanmore
Resources Ltd. for up to $1.35 billion.
BHP said Stanmore will buy its 80% stake in BHP Mitsui Coal, or
BMC, which operates the South Walker Creek and the Poitrel coal
mines in Queensland, a coal-rich Australian state located in the
northeastern part of the country. Japan's Mitsui and Co. owns the
The deal includes $1.1 billion cash on completion, $100 million
in cash six months later and a possible up-to $150 million payout
in the 2024 calendar year linked to prices. The agreement,
excluding the potential price-linked payment, represents an
enterprise value-to-Ebitda multiple of 6.9 times, BHP said.
BHP said profits from the deal could be used for future
dividends, buybacks, or both. It expects to deal to be completed in
the middle of the 2022 calendar year.
The mines produce metallurgical coal, a key ingredient in the
manufacturing of steel. BHP put the mines up for sale more than a
year ago to focus on higher quality coking coal it projects will be
in high demand from steelmakers as they seek to cut their carbon
"As the world decarbonizes, BHP is sharpening its focus on
producing higher quality metallurgical coal sought after by global
steelmakers to help increase efficiency and lower emissions," said
Edgar Basto, BHP's Australian minerals president.
BHP, the world's largest mining company by market value, remains
Australia's largest producer and exporter of metallurgical coal as
an equal partner in a separate alliance with Mitsubishi Corp. That
joint venture operates seven mines and owns and operates the Hay
Point Coal Terminal in Australia, one of the world's largest
Negotiations to sell the BMC operations have occurred against a
backdrop of surging coal prices. The price paid for Australian hard
coking coal exports rose to a record high in September, according
to S&P Global Platts, which has been assessing prices for that
type of coal since 2013.
The commodity's price, which has plateaued in record territory,
has more than tripled this year because of a global supply
Stanmore, which is majority owned by Singapore-listed Golden
Energy and Resources Ltd., has been active in deals for coal mines
in recent months. In July, one of its joint ventures bought two
mines from Peabody Energy Corp.
Golden Energy has guaranteed Stanmore's obligations to pay the
purchase price and any break fee obligations to BHP up to $600
million, BHP said.
BHP said a review process for its New South Wales Energy Coal
business is ongoing and that it remains open to all options for the
Write to Rhiannon Hoyle at email@example.com
(END) Dow Jones Newswires
November 07, 2021 17:16 ET (22:16 GMT)
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