Diversified miner South32 has agreed to sell its Illawarra Metallurgical Coal business for up to $1.65bn (R31.6bn), making headway in its strategy to simplify and reduce capital intensity.
The deal, which has been struck with an entity owned by Golden Energy and Resources (GEAR) and M Resources, will see the buyer assuming economic and operating control of Illawarra Metallurgical Coal, including all current and future liabilities.
The New South Wales-based Illawarra Metallurgical Coal produces premium-quality, hard coking coal for steelmaking. Its buyers, GEAR and M Resources, are established participants in the Australian metallurgical coal industry.
South32 said the disposal would allow it to focus on its operating positions and growth options in the aluminium value chain, base metals and manganese.
“This transaction will realise significant value for our shareholders and is consistent with our strategy to reshape our portfolio towards commodities critical in the transition to a low-carbon future,” said CEO Graham Kerr.
“It will streamline our portfolio, strengthen our balance sheet and unlock capital to invest in our high-quality development projects in copper and zinc.”
The transaction, which is subject to regulatory approvals, is expected to be completed in the first half of the company’s 2025 financial year.
In its financial results for the six months to end-December published mid-February, South32 reported its after-tax profit had plunged 92% to $53m compared with the year-earlier period.
The company posted record aluminium production and lower raw-material input prices but this was “more than offset” by lower commodity prices and a sharp drop in metallurgical coal volumes due to two planned longwall moves at Illawarra Metallurgical Coal operations in Australia.
At Hillside Aluminium in SA, the largest of the three operations, production decreased slightly (1%), but production at Brazil Aluminium doubled to 50,000 tonnes.
The largest drop was for realised prices for energy coal from its Illawarra Metallurgical Coal, which was down 38% to $101/tonne, and nickel from Cerro Matoso in Colombia, which was down 34%.
The South32 board in mid-February gave the green light for the development of a new zinc mine at its Hermosa project in Arizona, US.
The development is expected to bolster South32’s supply of critical commodities and reshape its portfolio towards commodities that are critical to a low-carbon future.
The Perth-based miner, which was spun off from BHP in 2015, is the world’s biggest producer of manganese.
South32 shares were up 3.49% to R36.45 on Thursday.
With Denene Erasmus
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