South32 to sell $2.5bn Illawarra coal project as it pursues its low-carbon ambition
Mining group South32 is selling its Illawarra coal site to a Ferrari-loving millionaire and a Singapore investment house.
Mining and metals company South32 will sell its Illawarra Metallurgical Coal project in Wollongong to coal multimillionaire Matt Latimore and Singapore investment group Golden Energy and Resources, as it purses its low-carbon ambition.
The $US1.65bn ($2.5bn) deal with GEAR and Mr Latimore’s M Resources is to be closed in the first half of the 2025 financial year. It is subject to certain conditions such as Foreign Investment Review Board approval and other regulatory approvals.
South32 coal customer BlueScope Steel has a right to pre-empt the transaction and purchase on the terms of the current agreement.
The transaction, which includes South32’s 16.7 per cent stake in the Port Kembla coal terminal, involves upfront cash of $US1.1bn at completion, a deferred cash payout of $US250m in 2030 and a contingent price-linked cash consideration of up to $US350m.
South32 chief executive Graham Kerr said that transaction would realise significant value for shareholders and was consistent with its strategy to reshape the portfolio toward commodities critical in the transition to a low-carbon future.
“It will streamline our portfolio, strengthen our balance sheet and unlock capital to invest in our high-quality development projects in copper and zinc,” he said.
“The transaction will also simplify our business and reduce our capital intensity.”
Investors appeared to be equally bullish about the sale and its shares rose 4.6 per cent to $2.95 on Thursday.
Citi analysts said the sale would ease market concerns around South32’s balance sheet following the recent final investment decision on the $US2.16bn Taylor project.
“From our perspective, the sale price for met coal looks to be fair and this is an ageing asset that requires ongoing reinvestment to support the associated infrastructure,” Citi said in a note.
“If BlueScope exercises its pre-emptive, South32 will instead divest said assets to BlueScope on the same commercial terms and conditions. We think it unlikely that BlueScope would pre-empt the sale.”
BlueScope, which has a longstanding agreement until 2032 for supply of a blend of metallurgical coal, said on Thursday that it was “considering its position” as kingmaker in South32’s planned sale.
“BlueScope has a longstanding agreement until 2032 for supply of a blend of metallurgical coal from the Appin and Dendrobium mines that are part of South32’s Illawarra operations, which also includes South32’s 16.7 per cent stake in the Port Kembla coal terminal,” the company said in a statement.
Mr Kerr said that Illawarra Metallurgical Coal produced a high-quality product which was a key ingredient in the production of steel that would be required until low-carbon steel becomes economically viable on a commercial scale.
“GEAR and M Resources are established participants in the Australian metallurgical coal industry, with a strong commitment to environmental and safety standards, who are well positioned to continue Illawarra Metallurgical Coal’s contribution to the local steel industry and the Illawarra and Macarthur regions,” he said.
A new joint venture entity GEAR M Illawarra Met Coal will acquire the asset. GEAR will hold the controlling 70 per cent stake. GEAR’s current major investments include a 59 per cent stake in Stanmore Resources with operations in the Bowen Basin in Queensland and a 50 per cent interest in the Ravenswood Gold mine, located in northeast Queensland.
M Resources has major investments in the mining sector via Stanmore Resources, One Rail and Metarock.
Mr Latimore is a self-described Ferrari fan and owns at least eight of them including an Enzo, F88 70th Anniversary and F430 Scuderia. He also has a Corvette C1 and a Mercedes AMG C63 507.
Mining and Energy Union south west district secretary Andy Davey said he was optimistic that this could be a positive outcome for Illawarra coal mineworkers, labelling South32 as a toxic and divisive employer.
“South32 has driven a toxic and divisive employment model built on outsourcing permanent jobs to labour hire companies and pitting contracting firms against each other to undercut wages,” he said.
“It’s good riddance as far as we are concerned.”
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