Stanmore Resources Will Acquire BHP Mitsui Coal’s 80 Percent Stake In Queensland Coking Coal Mines

It has been announced that mining giant BHP Billiton has reached a deal to sell up to $1.35 billion worth of Australian coal assets.

Australian mining firm Stanmore Resources has purchased a majority stake in BHP Mitsui Coal, which runs the South Walker Creek and Poitrel coking coal mines in Queensland. Mitsui, a Japanese conglomerate, owns the rest of the share in the joint venture. Coking coal, a key element in steelmaking, has soared in price due to the COP26 global climate negotiations in Glasgow. BHP’s shift away from fossil fuels is also a continuation of the Anglo-Australian miner’s efforts to diversify its portfolio.  Canada’s potash project is set to be completed with BHP’s $5.7 billion investment, which plans to extend its exposure to copper and nickel.

Industrial steel making contributes significantly to climate change.  In August 2020, BHP announced intentions to quit thermal coal used in power plants and put its investment in BMC on the market.  A large coal mine in Colombia has been sold to Glencore, which has announced intentions to integrate its oil and gas holdings with Woodside—still looking for a buyer for New South Wales Energy Coal, its remaining thermal coal asset.

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New South Wales Energy Coal’s two-year review process continues as planned, BHP said on Sunday, adding that the company “remains open to all possibilities and maintains communication with key stakeholders” in the process.  BHP’s coal exports will remain the world’s largest even if its majority investment in BMC is sold to Mitsubishi Corp.  During the next two decades, analysts predict that BHP will run down BMA’s mines, operating them to preserve quality and optimize cash flow.  Strong demand from China and steelmakers throughout the globe has pushed up the price of coking coal this year as the Covid-19 lockdown limits were loosened.

An S&P Global Platts price assessment shows that Australian hard coking coal has climbed from $120 to roughly $334 per tonne since the beginning of the year.  “We have reached an agreement with Canyon Capital Advisors and Farallon Capital Asia to finance the transaction.”  Stanmore will pay $1.1bn immediately, followed by $100m in six months, as part of the arrangement. An earn-out arrangement related to coking coal price might add $150 million to the purchase price.

Stanmore CEO Marcelo Matos said the transaction would make Stanmore a prominent coking coal producer and position the firm to create “significant cash flow.” BHP’s Isaac Plains mine in Queensland produces a comparable sort of coal to the properties it is purchasing from BHP.