BHP sells Australian coking coal mines to Stanmore Resources in $US1.2b deal
BHP, the nation’s largest mining company, is continuing its retreat from fossil fuels with a deal to sell two Queensland coking coal mines to ASX-listed Stanmore Resources.
The deal, under which Stanmore would pay $US1.2 billion ($1.6 billion) to acquire BHP’s 80 per cent stake in the BHP-Mitsui Coal joint venture’s Poitrel and South Walker Creek mines in the Bowen Basin, marks the latest step in the miner’s retreat from fossil fuels as part of a push to clean up its portfolio.
The BHP Mitsubishi Alliance is Australia’s largest producer and exporter of metallutgical coal.Credit:Nic Walker
“As the world decarbonises, BHP is sharpening its focus on producing higher-quality metallurgical coal sought after by global steel-makers to help increase efficiency and lower emissions,” BHP head of Australian mining Edgar Basto said.
“This transaction is consistent with BHP’s strategy, delivers value for our company and shareholders and provides certainty for BHP-Mitsui Coal’s workforce and the local community.
The two mines produce about 10 million tonnes of coal a year. BHP said it would continue to operate the assets until the deal’s completion and would provide “transitional services” to Stanmore for a short period.
If deal is completed, BHP’s only remaining metallurgical coal mines would be its higher-quality hard coking coal mines jointly owned with Mitsubishi, which it believes will be increasingly needed to meet the world’s ongoing steel demand including to build clean-energy infrastructure such as wind turbines.
However, BHP is also seeking to quit mining thermal coal, the world’s biggest source of greenhouse gas emissions. On Monday, the company said it remained in the process of looking for a buyer for its last thermal coal mine, at Mt Arthur in the NSW Upper Hunter.
“BHP remains open to all options and continues consultation with relevant stakeholders,” it said.
Producers of coal, Australia’s second-largest export, have been under mounting pressure as rising concerns about the fossil fuel’s enormous contribution to global warming cause investors and financial institutions to abandon the sector, pushing the cost of capital higher and restricting the ability to fund new projects.
An international push for countries to phase out coal-fired electricity by 2030-40 has also been building at the COP26 climate summit in Glasgow. United Nations Secretary-General Antonio Guterres has described coal as a “deadly addiction,” while COP26 president Alok Sharma is calling on leaders to “consign coal to history”.
But in a sign of the fossil fuel’s enduring near-term demand, coal prices have hit new peaks in recent months on the back of a sharper-than-expected post-pandemic rebound in economic and industrial activity colliding with global supply shortages.
Completion of BHP’s sale to Stanmore, which would require approval from the Foreign Investment Review Board, was expected around mid-2022, the companies said.
The purchase price comprised $US1.1 billion cash on completion, $US100 million in cash six months after completion, and the potential for up to $US150 million in a price-linked earnout payable in the 2024 calendar year.
Stanmore, which majority owned by Singapore-listed Golden Energy & Resources, described the deal with BHP as a “transformational” acquisition.
“This transaction will see the company become one of the leading metallurgical coal producers globally and provide Stanmore with a portfolio of tier-one assets with a significantly increased reserves and resources base and assets with an expected mine life exceeding 25 years’ production,” Stanmore chief executive Marcelo Matos said.
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