BlueScope eyes South32’s $2.53b coal deal

BlueScope Steel Limited (ASX: BSL) has announced it is considering its option to weigh in on South32 Limited’s (ASX: S32) plan to sell its Illawarra Metallurgical Coal business. 

South32 announced yesterday that it had agreed to sell its Illawarra Metallurgical Coal (IMC) business for $2.53b ($US1.65 billion) as the miner presses ahead with its strategy to move away from coal to focus on zinc and copper.  

The BHP spinoff agreed to sell the coal business to an entity owned by Golden Energy and Resources (GEAR) and M Resources, building on GEAR’s metallurgical coal holdings in Australia, in the deal expected to be finalised in H1 FY25.  

BlueScope has since released a statement indicating that it may intervene on the deal. 

In the statement BlueScope noted it has “a longstanding supply agreement with IMC out to 2032 for supply of a blend of metallurgical coal from its Appin and Dendrobium mines”.  

“BlueScope has ongoing rights under the long-term supply contract, including pre-emption acquisition rights in favour of BlueScope, and the company will consider its position.” 

South32 chief executive Graham Kerr says the sale of IMC would “realise significant value for our shareholders and is consistent with our strategy to reshape our portfolio toward commodities critical in the transition to a low-carbon future”. 

“It will streamline our portfolio, strengthen our balance sheet and unlock capital to invest in our high-quality development projects in copper and zinc,” he said. 

“The transaction will also simplify our business and reduce our capital intensity.” 

Completion of the deal remains subject to numerous other conditions being met, including BlueScope’s contractual rights and approval by the Foreign Investment Review Board (FIRB). 

GEAR, with its headquarters in Singapore, is a leading resources company in the Asia Pacific region. 

“GEAR and M Resources are established participants in the Australian metallurgical coal industry, with a strong commitment to environmental and safety standards, who are well positioned to continue Illawarra Metallurgical Coal’s contribution to the local steel industry and the Illawarra and Macarthur regions,” Mr Kerr said.? 

GEAR’s operations in Australia include mining of metallurgical coal through its subsidiary Stanmore Resources Limited and gold mining through its stake in Ravenswood Gold Pty Ltd.  

“Our focus remains the safe and reliable operation of Illawarra Metallurgical Coal,” Mr Kerr said.? 

“Over the coming months we will work with the buyer, our workforce, the local community, government, customers and suppliers to support a successful transition of ownership. 

“Illawarra Metallurgical Coal produces high-quality metallurgical coal, a key ingredient in the production of steel, which will be required until low-carbon steel becomes economically viable on a commercial scale.”