BHP has divested its 80 per cent stake in BHP Mitsui Coal (BMC) to Stanmore Coal as the company targets higher quality metallurgical coal in its hunt for decarbonisation.
Stanmore will acquire 100 per cent of BHP’s shares in Dampier Coal, the subsidiary holding BHP’s interest in BMC, for a cash consideration of up to $US1.35 billion ($1.82 billion).
The transaction comprises $US1.1 billion on completion, $US100 million six months after completion, and up to $US150 million on a price-linked basis whereby the average sales price exceeds a certain threshold over a two-year period, expected in the 2024 calendar year.
It is expected to be completed in mid-2022, following the satisfaction of certain conditions such as regulatory approvals.
The BMC joint venture owns and operates metallurgical coal mines in Queensland’s Bowen Basin, including the South Walker Creek mine and Poitrel mine, making up a combined production of around 10 million tonnes per annum.
President of BHP’s Minerals Australia division, Edgar Basto, said the divestment formed part of the company’s net-zero transformation.
“This transaction is consistent with BHP’s strategy, delivers value for our company and shareholders and provides certainty for BMC’s workforce and the local community,” he said.
“As the world decarbonises, BHP is sharpening its focus on producing higher quality metallurgical coal sought after by global steelmakers to help increase efficiency and lower emissions.”
Stanmore intends to fund the transaction through a partially underwritten renounceable entitlement offer of ordinary shares, a new $US625 million acquisition debt facility and other internal sources.
Stanmore chief executive officer Marcelo Matos said the acquisition represented the company’s strong foundations and fervour to expand.
“This is an exciting and transformative acquisition for Stanmore, and we are fortunate to be able to rely on the full support received from our controlling shareholders, GEAR (Golden Energy and Resources) as well as the Sinar Mas Group, to successfully execute this deal,” he said.
“This transaction will see the company become one of the leading metallurgical coal producers globally and provide Stanmore with a portfolio of Tier 1 assets.”
BHP flagged its intentions to offload BMC in August 2020 as it looked to simplify its portfolio.
At the time, BHP chief executive officer Mike Henry said the assets had not provided the company sufficient profits.