Coal news and updates

Anglo American’s coal mine sale faces hurdles due to price drop

Monday, September 9, was the date Anglo American had indicated it would begin receiving bids for its five central Queensland coking coal mines.

The quintet includes the productive Grosvenor underground mine, which was forced to close due to a fire at the end of June.

Complicating the success of any sale is the significant slump in coking coal prices, with the SGX futures price in Singapore falling from around $US263 a tonne at the end of June to approximately $US183 to $US186 a tonne on Friday.

Coking coal prices have followed iron ore prices lower, which will make it more challenging to generate enthusiasm for Anglo’s price expectations. The huge Chinese steel industry is facing difficulties, and this is likely to continue well into 2025.

Coal industry analysts had previously forecast the five mines could reach $US5 billion in value, but that was before the fire and the slide in prices.

Given the estimated $US1 billion cost to rehabilitate the Grosvenor mine and the lost production and exports for at least two years, Grosvenor has become a dubious addition to the four smaller mines.

The sale is part of the fallout from BHP’s failed attempt to acquire Anglo American in April-May.

Anglo revealed its own restructuring in the wake of BHP's plan to focus on copper businesses and sell off coal assets, while avoiding South African operations in iron ore, diamonds, and platinum.

Anglo has been working with a trio of global banks on the sale process—Goldman Sachs, Morgan Stanley, and Centerview Partners—who have all been advising the company, according to Reuters.

BHP has not indicated whether it would be interested, but after selling two of its mines in the same area—Daunia and Blackwater—to Whitehaven Coal, it seems unlikely, especially given that in its 2023-24 annual report, BHP stated its plans to spend several billion dollars expanding capacity at the five remaining mines by 2026-27.

Glencore might be interested, but despite keeping its coal business after paying nearly $US7 billion for Teck’s coking coal mines in Western Canada, it still faces a substantial debt problem (around $US10 billion), with bankers reluctant to see it increase further.

Yancoal, the Chinese-controlled NSW and Queensland thermal and coking coal exporter, is the most likely candidate. It withheld its interim dividend for the June 30 year, despite having $1.5 billion in cash, making it clear it was preserving funds for possible corporate opportunities.

Indian company Jindal Steel (JSW) owns two collieries near Illawarra Coal. There are connections between Jindal and Golden Energy.

In late August, JSW Steel announced the acquisition of up to 66.67% in the Australian mining company M Res NSW through its wholly owned subsidiary, JSW Steel (Netherlands) B.V.

M Res NSW is owned by Matthew Latimore, the owner of M Resources Pty Ltd ("M Resources"), an international mining, investment, marketing, and trading company.

M Res NSW holds a 30% interest in Golden M NSW Pty Ltd, the proposed ultimate owner of Illawarra Coal Holdings Pty Ltd, which operates the Appin and Dendrobium coking coal mines and associated infrastructure in New South Wales, Australia.

The remaining 70% interest in Golden M is held by Golden Investments (Australia) III Pte Ltd, a wholly-owned subsidiary of Golden Energy and Resources Pte Ltd.

A group of Indonesian companies, led by Golden Energy and Resources, is reportedly considering making an offer for the Anglo mines after purchasing Illawarra Coal from South32 in August for $A1.9 billion.

There seems to be no barriers, aside from FIRB approval, for JSW and Sun Energy to make a joint bid for the Anglo mines through M Resources.

Delta Dunia Group, a Jakarta-listed company that operates the BUMA coal mining services business in Australia, stated in July that it intended to expand through acquisitions.

China-backed Yancoal is another strong contender to bid for Anglo’s assets. The miner has repeatedly indicated its interest in pursuing metallurgical coal deals in Australia, backed by $A1.5 billion ($US1bn) in available funds. If successful, this would position Yancoal as one of Australia’s top producers, capitalising on rising demand across Asia.

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.