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South32 Sells Illawarra Coal Project for $1.65 Billion to Focus on Copper and Zinc

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Australian mining company South32 announced the sale of its Illawarra metallurgical coal project in New South Wales for $1.65 billion to an entity jointly owned by Golden Energy and Resources (GEAR) and M Resources.

Key Points:

  • Sale Price: $1.65 billion, comprising:
    • Upfront cash payment of $1.05 billion at completion.
    • Deferred cash consideration of $250 million payable in 2030.
    • Potential contingent cash consideration of up to $350 million linked to future coal prices.
  • Completion: Expected in the first half of fiscal 2025, subject to approvals.
  • Rationale for South32:
    • Streamline portfolio and focus on development projects in copper and zinc, which are critical for the low-carbon transition.
    • Reduce capital intensity.
    • Unlock capital for investments in growth areas.
  • Illawarra Project:
    • Generated $1.64 billion in revenue for South32 in fiscal 2023 (18.2% of total revenue).
    • Produces high-quality metallurgical coal, a key ingredient in steel production.
  • Buying Entity:
    • 70% owned by GEAR.
    • 30% owned by M Resources.
    • Committed to environmental and safety standards.
    • Well-positioned to continue Illawarra’s contribution to the local steel industry.

South32 CEO Graham Kerr emphasized the strategic benefits of the sale. He stated that the transaction will allow the company to:

  • Focus on its core business: Develop copper and zinc projects crucial for the transition to a low-carbon future.
  • Improve financial health: Strengthen the balance sheet and unlock capital for investments.
  • Simplify operations: Reduce overall business complexity and capital intensity.

While Illawarra is a significant revenue generator for South32, the company believes that long-term growth lies in copper and zinc. The sale allows them to reallocate resources and focus on these strategic metals while ensuring a smooth transition for the Illawarra project and its employees.

The completion of the sale remains subject to approvals, including from the Foreign Investment Review Board. The coming months will involve collaboration between both parties to ensure a successful transfer of ownership and minimize disruption to stakeholders including employees, the local community, and customers.

Source: TheCoalTrader, AI generated

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