Argus Media Limited

11/08/2021 | News release | Distributed by Public on 11/07/2021 20:35

BHP to sell Australian coking coal mines

UK-Australian resources firm BHP has agreed to sell its 80pc stake in the BHP Mitsui Coal (BMC) joint venture to Australian coal mining firm Stanmore for $1.2bn.

The deal will more than quadruple the metallurgical and thermal coal production capacity of Stanmore and requires the firm, which has a market capitalisation A$280mn ($209mn), to raise $600mn in equity and $625mn in debt. Indonesian-Singaporean joint venture Golden Investments owns 76pc of Stanmore after failing to complete a full takeover in May 2020.

The deal, which is still subject to final approvals, is due to be completed in mid-2022 when Stanmore will take control of the 6mn t/yr South Walker Creek and 4mn t/yr Poitrel PCI grade and semi-hard coking coal mines in Queensland. This will compliment Stanmore's 2.4mn t/yr Isaac Plains metallurgical and thermal coal mine in Queensland.

Japanese firm Mitsui owns the remaining 20pc of BMC.

BHP will retain its 50pc stake in the BHP Mitsubishi Alliance (BMA) joint venture, which contains the higher-grade coking coal mines of Blackwater, Goonyella, Peak Downs, Saraji, Daunia and Caval Ridge, as well as the Hay Point export terminal at Mackay. It plans to minimise investment in BMA, with some possible increases through productivity improvements but no major expansion plans.

BHP shelved plans to expand South Walker Creek to 7.9mn t/yr in 2019, and the BMC assets require capital expenditure that BHP has been unwilling to spend. BMC produced 8.74mn t of coal in the financial year to 30 June, down from 9.54mn in 2019-20.

BHP's cost of producing coal at its combined BMA and BMC operations rose to $64.41t in the financial year to 30 June from $56.53/t the prior year, and is set to rise to $80-90/t in the 2021-22 financial year because of higher diesel costs.

The sale will see BHP's coking coal production fall to 46mn-52mn t over the medium term, down from 72.58mn t in 2020-21.

BHP is still looking at options to divest its 18mn t/yr Mount Arthur thermal coal mine in New South Wales, Australia.

Premium hard coking coal prices have more than tripled since May, while lower-grade metallurgical coal like those produced at BMC have also rallied, but not as strongly. Argus last assessed the premium hard low-volatile coking coal price at $403.60/t fob Australia on 5 November, up from $107.15/t on 30 April. It last assessed the semi-soft coking coal and PCI price at $245/t fob Australia and $271.90/t respectively on 5 November, up from $92.90/t and $108.50/t on 5 May.

By Jo Clarke

Metallurgical coal prices$/t