Anglo American’s Grosvenor mine fire delivers blow to company restructure plan after blocking BHP takeover

Miner Anglo American is fighting an underground fire at its beleaguered Grosvenor mine in central Queensland, in a fresh blow to the company’s safety and operational credentials.

Smoke billowing from the Grosvenor mine as workers were evacuated.

A fresh disaster at Anglo American’s troubled Grosvenor coking coal mine in Queensland has blown a hole in chief executive Duncan Wanblad’s rescue plan for the company, only months after the Anglo board backed its boss against a BHP takeover offer.

Anglo is still trying to get an underground fire at Grosvenor under control after the mine was evacuated on Saturday after a “gas ignition incident”.

It said on Monday it was working with specialist teams from the Queensland Mines Rescue Service and authorities to extinguish the blaze and figure out first-steps for safe re-entry.

The sale or spin out of Anglo’s Queensland coal assets was a central feature of Mr Wanblad’s rescue plan for the mining major, which was rushed out to market in mid-May as part of the company’s defence to an all-scrip bid from BHP which ultimately valued Anglo at about $75bn.

Anglo’s five Queensland coking coal operations were expected to fetch about $US3bn in the current market, according to analyst estimates, but the latest disaster at Grosvenor is expected to put the mine out of commission for months amid yet another series of investigations into Anglo’s safety standards.

Grosvenor is worth about 30 per cent of Anglo’s coking coal output in Queensland, but the portion was forecast to fall in the second half of the year as the company moved its mining face.

But, any long-term concerns about its return to production would likely delay a sale or force Anglo to accept a significant haircut on price, analysts said on Monday.

Citi analyst Ephrem Ravi said in a client note the Grosvenor fire could strip up to 3 per cent from the company’s annual earnings.

RBC analyst Marina Calera put the likely impact on earnings at only about 1 per cent, but said she expected the latest incident to weigh on market sentiment for the company.

“With Anglo currently under pressure to execute on an ambitious restructuring plan which involves selling these assets, the downgrades to production will likely weigh on the stock and the potential sale of the division,” she said in a client note.

Anglo American chief executive Duncan Wanblad. Picture: Supplied

Only opened in 2016, Grosvenor has had a poor safety record, including three roof collapses in 2016, underground fire, electric shocks and numerous warnings from officials over methane containment.

The underground deposit includes far higher levels of methane than in other Bowen Basin coal deposits, which Anglo has struggled to manage.

In 2020 an underground explosion seriously injured five workers, forcing its closure until February 2022.

When resuming production, Anglo said it had invested heavily to improve safety systems at the underground mine, including doubling its methane drainage capacity, automating more mining equipment and installing new monitoring equipment.

The company said on Monday no workers were harmed in the latest fire.

Queensland’s mine safety department said on Monday it was investigating the latest incident at Grosvenor.

The latest setback at Grosvenor deals a body blow to Mr Wanblad’s efforts to return Anglo to the good books for global investors. Cash from the divestment of its Queensland coking coal assets was set to be used to retire debt and bolster Anglo’s balance sheet for reinvestment in its South American copper mines.

It also throws doubt over whether the Anglo boss can deliver on promises to improve the company’s operational performance to compete with its peers — a key line for BHP boss Mike Henry in pitching the takeover to Anglo shareholders in May.

BHP walked away from its bid a month ago, and is largely excluded from a return tilt at Anglo for a year under UK takeover rules. BHP retains the right to return with a single bid in the one-year period, however — but only if it wins permission to do so from the UK takeovers panel.

BHP chief executive officer Mike Henry. Picture: Supplied

The Grosvenor fire is the second major incident in Queensland’s coal industry in a week, after a rail collision late last week put the Blackwater line to the coal port of Gladstone out of commission.

Despite initial fears from analysts the line could be out for as much as a week, sharply limiting exports through the Gladstone terminal, The Australian understands the line was reopened late on Monday.

The twin disasters sent shares in other Queensland coal miners surging, however, in anticipation of a sharp lift in the coking coal price on the back of supply restrictions.

Stanmore Resources shares closed up 5.1 per cent to $3.72 per share, with Coronado Global Resources shares up 8.9 per cent to $1.29 per share and Whitehaven Coal shares up 6.5 per cent to $8.13 per share.

Originally published as Anglo American’s Grosvenor mine fire delivers blow to company restructure plan after blocking BHP takeover