(Bloomberg) -- Whitehaven Coal Ltd. has agreed to sell 30% of one the world’s biggest metallurgical coal mines to Japan’s top two steelmakers, in a $1.1 billion deal that helps the Australian miner pay down the cost of acquiring the operation just a few months ago.
Nippon Steel Corp. will buy 20% of the Blackwater mine in Queensland state, while JFE Steel Corp. will purchase 10%, the Australian miner said in a statement on Thursday. The Japanese companies are already long-term buyers of Blackwater coal, and the transaction is expected to be completed in the first quarter of 2025.
The global coal industry is undergoing significant changes as miners grapple with the world’s looming shift away from fossil fuels. Anglo American Plc is selling its coal division, Glencore Plc decided to keep hold of its unit, while BHP Group Ltd. offloaded mines including Blackwater to Whitehaven for $3.2 billion in April.
The latest deal “will immediately strengthen Whitehaven’s balance sheet and provide enhanced financial flexibility,” the company said in a stock exchange filing. The miner had about A$1.3 billion ($878 million) in debt as of June 30. Its shares rose 5.4% to A$7.57 by 12:10 p.m. Sydney time.
For the Japanese steelmakers, the transaction offers a stronger footing in the Australian mining heartland that provides much of the metallurgical coal for their huge blast furnaces. While the steel industry is moving slowly toward decarbonization, mills will still need huge quantities of coal for many years to come. Blackwater produces more than 12 million tons a year for export to Asian steel mills.
Nippon Steel has a “strong sense of urgency” to shore up its supplies of metallurgical coal amid the threat of shrinking investment in new mines, the Japanese firm said in a statement. The company doesn’t have specific plans to acquire more mine assets, but “if there are good projects we will consider them,” Ryuichi Nagai, managing executive officer, said at a briefing in Tokyo.
The value of the 30% stake sale was a “positive surprise” for Whitehaven, Citigroup Inc. analyst Kate McCutcheon wrote in a note, while Jefferies Financial Group Inc. analyst Daniel Roden said the price was better than expected.
“The deleveraging could accelerate capital returns in the near term, and see a rotation of yield investors” into Whitehaven’s stock, Roden wrote in a note.
Whitehaven’s purchase of Blackwater and another coal project from BHP turned it from a New South Wales coal producer to one that gets the majority of its revenue from Queensland. Earlier this month, Whitehaven announced redundancies across both mines that would affect nearly 200 workers.
--With assistance from Rob Verdonck.
(Updates with Nippon Steel comments in sixth paragraph.)
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