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Bankers on the scene at PE-owned Queensland coal mine Olive Downs

The Bowen Basin’s Olive Downs, billed by its private equity owners as potentially the world’s last greenfield coking coal mine, is understood to be working with Wall Street bank Jefferies amid changes on its shareholder register.

Jefferies’ US-based resources bankers have been trying to line up buyers for a stake in Olive Downs. It comes after this column revealed the mine’s owners – Sydney’s Pembroke Resources and its backer, Denham Capital – were in talks with limited partners keen for an exit. Sources said the process is expected to result in North American funds check into Olive Downs’ register. Denham Capital’s Perth-based managing director, Bert Koth, is running point on the mooted deal, however, a final decision on the continuation fund is yet to be made.

Pembroke and Denham paid $120 million plus royalties in May 2016 to buy the Olive Downs tenements off Peabody Energy and China’s CITIC, in a well-timed acquisition. At the time, coking coal was trading at less than $US100 per tonne; the commodity breached the $US300 mark in 2022 before falling in recent months.

In the seven years since their arrival, the PE owners have tipped in nearly $500 million if the acquisition price is included. Pembroke’s Barry Tudor claimed Olive Downs is a billion-dollar project, in an interview with The Australian Financial Review in February.

The mine is aiming for 20 million tonnes in annual coal production when fully built. That would more than double the 8.3 million tonnes production from Goonyella, the biggest Queensland coking coal mine in BHP and Mitsubishi’s portfolio, in the 2022 financial year. Over its 80-year mine life, it is expected to generate up to $10.2 billion in royalties for the Queensland government, according to Pembroke’s forecasts.

Elsewhere in coal M&A, Whitehaven is seeking buyers for a minority stake in the Blackwater metallurgical coal mine, which it bought off BHP and Mitsubishi in a hotly contested auction last year. And South32 is waiting on BlueScope to make up its mind on whether it wants to exercise its pre-emption rights over the Illawarra metallurgical coal mine, after Indonesia’s Golden Energy and Resources and bid partner M Resources agreed to pay up to $US1.65 billion ($2.5 billion) to buy the asset on February 29.

Source: AFR