South32 set to put Illawarra coal mine up for sale

South32’s metallurgical coal operation in the Illawarra.

Speculation is mounting that one of the next assets in the mining and metals space to be placed on the block will be South32’s metallurgical coal operations in the Illawarra.

The business in NSW is said to have not much of its mine life left and it needs to be extended.

Despite this, there is talk in the market that it is likely to soon be on the block. The mine produces premium-quality hard coking coal for steelmaking within Australia and around the world. Coal prices are currently booming, and while there are few buyers for thermal coal mining assets, metallurgical coal – used for making steel – is more in demand.

A sale would offer further evidence that major listed mining groups in Australia are distancing themselves from the commodity as investors and lenders become nervous about its impact on the environment.

BHP sold its BMC metallurgical coal business in Queensland to Indonesia-backed Stanmore Coal for $US1.2bn ($1.7bn) this year, but opted to retain its Mt Arthur NSW mining operation after offers came in below expectations. It continues to generate strong cash flow.

It comes as Japan’s Idemitsu places its $500m Ensham Resources coal mining business in Queensland up for sale through KPMG, with Indonesian buyers said to be circling.