Australia's Whitehaven Set to Buy Two BHP, Mitsubishi Coal Mines -- Update

By Rhiannon Hoyle

BHP Group, the world's biggest miner by market value, on Wednesday named Australia's Whitehaven Coal as the preferred bidder for two steelmaking coal mines it owns with Japan's Mitsubishi Corp.

Earlier this year, BHP said the joint venture was seeking a buyer for its Daunia and Blackwater mines in the Bowen Basin of Australia's coal-rich Queensland state. The BHP Mitsubishi Alliance, Australia's largest producer and exporter of metallurgical coal, is narrowing its focus on high-quality coal it expects steel mills will increasingly buy to help curb their carbon emissions.

"BHP confirms that Whitehaven Coal has been selected as the preferred bidder in the divestment process," the miner said in a quarterly production report on Wednesday. It didn't provide any further details on the bid or the timing of any deal, and a spokesman declined to comment.

Whitehaven requested trading in its shares stop until it makes an announcement on its bid for the mines.

The Blackwater and Daunia mines produce millions of metric tons each year of mostly metallurgical coal for steel that's shipped mainly to buyers across Asia. The Blackwater mine, opened in 1967, is one of the longest coal mines in the Southern Hemisphere.

The mines produce lower-quality coal than some of the joint venture's other operations, and BHP previously said those two mines would struggle to compete for future investment. "What we are doing here is further concentrating our portfolio on the best-of-the-best assets," BHP Chief Executive Mike Henry said in February.

BHP last year sold its controlling interest in two other mines to Stanmore Resources in a roughly $1.35 billion deal. It also sold a minority interest in a Colombian mine to Swiss commodities giant Glencore.

BHP sought to sell its last thermal-coal mine, the Mt. Arthur coal operation in Australia, but failed to secure a buyer. Last year, BHP said it would instead keep mining the pit for several years before closing it and beginning rehabilitation work.

The world's top miner has been pivoting toward commodities it expects to enjoy higher demand amid a global energy transition, especially industrial metals copper and nickel, and fertilizer ingredient potash.

BHP bought Australian copper miner OZ Minerals in May in what was its biggest acquisition in more than a decade. Before that, it struck a deal with Australia's Woodside Energy to offload its global petroleum business.

Still, coal remains an important money-spinner for the mining giant. BHP's coal interests contributed 18% of the group's underlying Ebitda in the year through June, with a margin of 46%.

BHP says it believes high-quality metallurgical coal will be needed to fuel blast furnaces in the steel industry for decades to come, underpinned by growth in steelmaking in countries such as India, which--unlike China--relies on imports of steelmaking coal.

"Higher quality coking coals are expected to be valued for their role in reducing the greenhouse gas emissions intensity of blast furnaces," BHP said in an earnings report in August.

On Wednesday, BHP reported a fall in output of metallurgical coal and steelmaking ingredient iron ore for the first quarter of its fiscal year, but said its copper production was sharply higher versus a year earlier. It said it is on track to meet fiscal-year production and cost estimates set for all its operations.

Write to Rhiannon Hoyle at [e-mail]

(END) Dow Jones Newswires

October 17, 2023 20:35 ET (00:35 GMT)

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