Overseas players eye BHP’s non-core coalmines

Advisers believe BHP’s stake in the Colombian Cerrejon thermal coal mine will be a tough sell.

Bids for BHP’s non-core coalmines have hit the desks of the company’s advisers and the understanding is that the contest so far is dominated by groups from overseas.

DataRoom understands that final bids are due at the end of July for the portfolio comprising BHP’s Mt Arthur thermal coalmine in NSW, the stake it owns in its Cerrejon thermal coal mine in Colombia and two metallurgical coalmines in Queensland held as part of an alliance agreement with Mitsui Coal known as BMC.

Most believe that the Colombian coalmine will be a tough sell and that the contest will largely focus on the Australian assets.

Working on BHP’s coal assets has been Macquarie Capital, UBS, Goldman Sachs and JPMorgan.

Last year, analysts placed a price tag on the entire portfolio of about $7 billion, but with the weakening sentiment around coal, now it is thought the valuation is more likely to be about $2 billion for the Australian coal assets.

Sources say it would have made sense for listed coalminers New Hope and Whitehaven Coal to have put in an offer.

However, sources say they are not believed to be in the mix.

The problem for both groups is that thermal coalmines in their own portfolios have been weighing on their share prices, although offering a lift is likely to be the recent boost to the thermal coal price, fuelled by strong Asian demand.

Newcastle coal, which is used to fire power stations, has just hit $US123.75 a tonne, the highest level since 2011 and up 150 per cent in the past nine months alone.

This was after it slid to a low of $US48 a tonne in September.

China’s Yancoal is understood to have shown some interest, but is now not thought to be a strong contender.

BHP has said it is also open to a demerger of its coal assets.

DataRoom understands an Indonesian party has shown interest in some of the assets.

Possible candidates could include Indonesia’s Golden Energy, which controls Stanmore Coal, or thermal coal exporter Adaro Energy.

Black funds dedicated to buying out-of-favour assets and offering a clean energy solution that sees them wound down over time are also said to have been keen.

Among the groups said to be setting up such funds is commodity trader Trafigura and global investor BlackRock.

The expectation is that parties will show interest for the Queensland coalmines, but less interest in Mt Arthur in NSW.

Swiss trader Glencore offered to take Mt Arthur off BHP’s hands several years ago in exchange for a payment.

Yet some believe that Mt Arthur on its own would be too small for BHP to demerge in isolation.