Whitehaven Coal is selling a
30% stake in its Blackwater coal mine to Japanese steel giants Nippon Steel and
JFE Steel Corporation for US$1.08 billion (~A$1.6 billion).
The company entered into
separate deals with Nippon Steel and JFE Steel Corp to sell stakes in the mine
of 20% and 10%, respectively.
Both companies are long-term
consumers of the metallurgical coal produced by the Blackwater mine, and as
part of the deal, Whitehaven has entered into offtake agreements with each
company.
Whitehaven CEO Paul Flynn said
the proceeds from the sell-down would strengthen Whitehaven’s balance sheet,
“providing enhanced flexibility as we assess the range of competing
opportunities for capital in line with our capital allocation framework’’.
Australia is the number one
supplier of coal for Japan’s steelmakers who, given growing competition from
India and Indonesia, have been concerned by the wave of consolidation underway
in Australia.
Upon completion of the sale,
Blackwater will be owned by Whitehaven, Nippon Steel and JFE Steel via an
unincorporated joint venture, managed by Whitehaven. Whitehaven expects the
deal to be completed in the first quarter of next year.
News of the Blackwater sale came
as Whitehaven reported a 72% fall in underlying net profit to $740 million, on
revenue of $3.82 billion, which was down 37%. Net profit attributable to
shareholders was 87% lower at $355 million.
Whitehaven will pay a fully
franked 13-cent dividend, sharply down from last year’s 42-cent final dividend.
The company had net debt at the end of June of $1.3 billion.
The company provided no specific
guidance for the current year.
Higher coal prices anticipated
The thermal and metallurgical
coal producer is, however, predicting a strong outlook for commodity
prices.
“The forecast structural
shortfall in global metallurgical coal production, particularly due to
long-term production constraints of hard coking coal from Australian producers,
combined with increased seaborne demand from India, is anticipated to drive
higher metallurgical coal prices over the near and long term.
“Whitehaven’s metallurgical coal
portfolio will benefit from the supply constraints expected in both the near
and longer term.
“Demand for high calorific value
(CV) thermal coal remains robust in Whitehaven’s mature and emerging markets in
Asia to fuel HELE (high-efficiency, low-emissions) power generation.
“The structural supply shortfall
in seaborne high CV thermal coal continues to grow as a result of
under-investment in new supply and depletion of existing supply which is
supportive of medium and long-term high CV thermal prices.’’