BHP, Mitsubishi to sell Blackwater and Daunia coal mines to Whitehaven Coal

In a significant mining transaction, BHP and Mitsubishi Development Pty Ltd (MDP) have inked Asset Sale Agreements for the divestment of the Blackwater and Daunia mines. These mines are integral to the BHP Mitsubishi Alliance (BMA) metallurgical coal joint venture in Queensland, where both BHP and MDP have an equal 50% stake.

Breaking Down the Purchase Details

Whitehaven Coal, through its wholly-owned subsidiaries, will acquire the Blackwater and Daunia mines for a potential cash sum of up to US$4.1 billion. The structured deal includes an immediate US$2.1 billion cash payment on deal completion, an additional US$1.1 billion distributed over the subsequent three years, and a potential US$0.9 billion price-linked earnout also payable over a three-year span. Factoring out the earnout, this agreement touts an Enterprise Value/Reserves multiple of 12.8/t^1.

Essential Terms and Conditions

Key to note, the deal’s fruition hinges on specific conditions like acquiring competition and regulatory approvals. As a gesture of commitment, the Buyers will forward a US$100 million deposit upon signing. BHP and MDP reserve the right to retain this amount under specific conditions, mainly if the proposed divestment terminates.

The sale’s consummation is projected for the June 2024 quarter. Post-completion, the Buyers will take over economic and operational controls of both mines, encompassing all environmental responsibilities and rehabilitation duties.

Transition Phase and Future Operations

Up until the deal’s completion, BMA will oversee the mines’ operations. To guarantee a seamless ownership transition, they’ll collaborate extensively with the Buyers and Whitehaven Coal. For a brief period post-completion, BHP has committed to offering transitional services to the Buyers.

Stakeholder Comments on the Deal

Geraldine Slattery, BHP’s President Minerals Australia, shared her perspective: “This transaction has delivered a good outcome for the BHP Mitsubishi Alliance, our workforce and the communities around the Blackwater and Daunia operations.”

She further added, “Whitehaven Coal has a strong track record as a responsible and reliable operator, and we will work closely with them to achieve a smooth change of ownership focused on maintaining safe and productive operations and supporting people and communities through the transition. In line with our long-term strategy, we will continue to develop our high-quality metallurgical coal assets in Queensland, which are sought after by global steelmakers and needed to support the energy transition.”

The divestment’s net proceeds are earmarked to reduce the Group’s net debt, fortifying their financial position.