Whitehaven completes $6.4bn deal to buy Queensland coal mines
Whitehaven Coal has completed the $6.4bn acquisition of the Blackwater and Daunia mines in Queensland’s Bowen Basin, helping secure work for more than 2000 people.
Whitehaven Coal has completed the $6.4bn acquisition of the Blackwater and Daunia mines in Queensland as it continues to look for a key investor to underpin the purchase.
Whitehaven managing director Paul Flynn said the deal for the “long-life” metallurgical coal mines in the Bowen Basin was a significant milestone for the company that would effectively double the size of its business and secure employment for more than 2000 workers.
Underscoring the long-term viability of the coal business, Whitehaven said there had been strong interest in the sale of a 20 per cent stake in the Blackwater mine to global steelmakers.
“To describe it colloquially, we bought the loaf, and we’re selling a slice,” Mr Flynn said. “We expect to get a better price for the slice, and the interest that we’re seeing is from people who are trying to make sure that they’ve got access to material for the next two or three decades.
“We’re committed to the Australian coal sector for the long haul.”
Mr Flynn said the acquisition of the mines from BHP meant certainty for workers at both sites and for businesses that relied on the mines for economic security.
He said 95 per cent of Blackwater and Daunia employees had accepted offers of continuing employment at Whitehaven.
“We’re looking forward to welcoming the team of more than 2100 to Whitehaven and working with the local community and other stakeholders who will remain an important part of both operations,” he said. “We understand the importance of mining to regional areas and we are proud to have made this significant investment into regional Queensland.”
Announced last October, the acquisition of Blackwater and Daunia transforms Whitehaven into a leading metallurgical coal producer, repositioning its portfolio to deliver sales revenue driven by approximately 70 per cent metallurgical coal and approximately 30 per cent thermal coal.
Mr Flynn said the acquisition would allow both Whitehaven and Queensland to play a leading role in helping to meet strong current and anticipated global steel demand for many years to come, particularly in high-growth market regions such as India and Southeast Asia.
“The acquisition will deliver Whitehaven geographic and operational diversification benefits and provides attractive growth opportunities in Queensland’s Bowen Basin, including synergies with Whitehaven’s Winchester South development project,” he said.
Whitehaven officially takes operational control of Blackwater and Daunia on Wednesday. Daunia has an expected mine life of 17 years while Blackwater has more than 50 years.
Whitehaven Coal earlier this year shrugged off a slide in interim profit, saying long-term steelmaking demand from Asia and India justified the deal to buy the mines.
Lower coal prices hit Whitehaven Coal’s first-half performance, with revenues shrinking 58 per cent to $1.6bn and net profit dropping 86 per cent to $257.6m. Underlying profit – excluding expenses relating to its purchase of BHP’s Daunia and Blackwater coal mines – came in at $372m, down 79 per cent on the prior corresponding period.
Mr Flynn said at the time that an anticipated shortfall in hard coking coal to supply Asia, particularly to India, was expected to underpin metallurgical coal over the longer term. “We will benefit significantly from metallurgical coal market dynamics through the Daunia and Blackwater acquisitions,” Mr Flynn said.
Australia’s commodity export earnings are set to decline as the prices of iron ore, liquefied natural gas and coal slump, according to the Department of Industry, Science and Resources. Prices will be affected by fewer supply disruptions and “relatively soft” global economic growth, together with an expected strengthening in the dollar.