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Whitehaven’s Blackwater selldown may be upsized

It’s down to the short strokes at Whitehaven Coal’s sale of a minority stake in Bowen Basin’s Blackwater metallurgical coal mine, bought alongside Daunia for about $6.4 billion from BHP and Mitsubishi last year.

Sources said JFE Steel Corporation, Japan’s second-largest steel producer after Nippon Steel, is in advanced discussions to acquire a circa 10 per cent stake in Blackwater. The suitor is already a shareholder at QCoal’s $1.76 billion Byerwen mine in the region, which feeds its West Japan steelworks.

Of note, Whitehaven Coal, in tandem, is in active discussions with a handful of other suitors, including India’s JSW Group, to come onto Blackwater’s register alongside JFE. Japanese trading house Itotchu has kept close to Whitehaven for months.

Sources said it wouldn’t be surprising if Whitehaven ends up selling 25 per cent to 30 per cent of the mine to two buyers – instead of the 20 per cent to one party, as initially planned. However, a final decision on the size of the selldown is yet to be made.

While the mooted selldown is incomplete, Whitehaven expects to have it locked in by the time June 30 rolls around. With a price marker of about $US500 million for a 20 per cent share, it should also bode well for the coal company’s dividend prospects and debt load.

Whitehaven eschewed an equity raise to bankroll its $6.4 billion purchase of Blackwater and Daunia from BHP and Mitsubishi. Instead, it cut back on dividends and lied up $US900 million from Ares Management, Canyon Partners and Farallon Capital. It indicated its intention to sell a stake in Blackwater soon after, collecting non-binding indicative offers in mid-March or a fortnight before it even took the keys on April 2.

Source: AFR