Whitehaven Coal has bowed out of the sale process to buy the $US3bn-plus Kestrel coal mine, leaving Stanmore Coal in pole position to win the contest when it gets under way next year.
It is understood Kestrel has been the subject of recent debate in Whitehaven’s boardroom.
The outcome is that Whitehaven needs to concentrate on bedding down its Blackwater and Daunia coal mines, purchased from BHP for $5bn last year.
That deal involved plenty of shareholder debate, including strong opposition from activist investors who wanted Whitehaven to return more cash to investors rather than investing in additional projects.
The group managed to get the deal across the line without raising equity. Tapping the market to fund the purchase was what some shareholders were most worried about.
In the end, shareholders supported the purchase in October last year, with the shares up 12 per cent on the news.
Whitehaven paid for the transaction with debt, cash and by later selling 30 per cent stakes to Nippon Steel and JFE Steel in Blackwater for $US1.08bn.
Investors have long memories about large deals carried out by corporates that later turn sour, and history shows it takes time for companies to build up investor trust to move on deals.
Bank of America and Macquarie Capital will be working on the sale of Kestrel for part-owner EMR Capital.
Peabody Energy recently purchased Anglo American coal mines for $US3.8bn, seeing off other competitors including a Stanmore Coal-led consortium and Yancoal, so it will probably also be on the sidelines.
Yancoal is 62 per cent-owned by the Chinese state-owned Yankuang Energy, and while it offers top dollar in auctions, the time taken to gain Foreign Investment Review Board approval and sign-off from the Chinese state have been a handbrake on it winning local coal mine auctions the past.
Kestrel is the world’s largest underground coking coal mine, producing about 7.1 million tonnes of coal annually.
It is in Queensland’s Bowen Basin, 50km northeast of Emerald, and was purchased from Rio Tinto by the Owen Hegarty-chaired EMR Capital in 2018 for $US2.25bn.
EMR Capital owns 52 per cent. Adaro Energy owns the remainder and has pre-emptive rights to buy out the asset. It is understood Adaro Energy would be a seller at the right price.
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