Whitehaven Coal’s acquisition of the Blackwater and Daunia mines

Last month, the Australian Mining Review focused on Whitehaven Coal’s (ASX: WHC) existing mines, while this month the focus shifts to the recently acquired Blackwater and Daunia mines.

In April 2024, Whitehaven acquired the Blackwater and Daunia mines from BHP (ASX: BHP) and Mitsubishi Development (MDP).

Both mines were part of the BHP Mitsubishi Alliance (BMA) metallurgical coal joint venture in Queensland.

Whitehaven paid BMA a cash consideration of $3.03b (US$2b) on completion, plus a preliminary completion adjustment of $66.72m (US$44.1m) for working capital and other adjustments.

There remains a $1.66b (US$1.1b) cash payment, payable by Whitehaven to BMA over three years post completion, plus a potential additional amount of up to $1.36b (US$900m) in a price-linked earnout may also be payable by Whitehaven to BMA over three years.

Whitehaven managing director and chief executive Paul Flynn commented on the acquisition when it was first announced.

“Daunia and Blackwater produce much-needed metallurgical coal that is in high demand across Asia – including in India and Southeast Asia where population growth and economic development is expected to drive strong demand for steel production and metallurgical coal through to at least 2050,” he said.

“This acquisition will increase our exposure to these high growth market segments while expanding our regional footprint through new customers.”

Upon completion of the acquisition, Mr Flynn commented on the significant milestone.

“This is a significant milestone for Whitehaven that transforms us into a leading metallurgical coal producer and will deliver benefits for all our stakeholders,” he said at the time.

“We are well placed to execute a smooth transition and to integrate the Daunia and Blackwater mines into the Whitehaven portfolio.

“We are excited to welcome the team at Daunia and Blackwater into our business and we look forward to working with the local community and other stakeholders who will remain an important part of our operation.”

Daunia

Located 30km southeast of Moranbah and 170km southwest of Mackay, the open cut Daunia mine produces a hard coking coal and pulverised coal injection metallurgical coal product.

In addition to the mine, a coal handling preparation plant is present at the site.

The mine opened in 2013, has an expected mine life to 2040, JORC resources of 115mt and produced 431kt of coal in the December 2023 quarter (BHP’s 50% interest and its last report before selling the mine).

Coal from Daunia is exported to customers across Asia through either the Hay Point Coal Terminal or the Dalrymple Bay Coal Terminal.

Mining at Daunia is undertaken using a mining fleet consisting of one large electric shovel and two large hydraulic excavators for waste removal.

Smaller excavators are used for coal mining and the removal of low productivity waste wedge passes on top of coal.

Once extracted, the coal and waste are loaded by the excavators into a fleet of 27 autonomous CAT793 trucks and seven autonomous CAT797 trucks.

In addition to the autonomous trucks, there’s also 70 light autonomous vehicles and 32 medium autonomous vehicles fitted with proximity awareness technology, 52 ancillary machines with terrain awareness and two communications towers.

Notably, Daunia is currently operating fully autonomous.

Blackwater

One of the largest producing metallurgical coal mines in Queensland, the Blackwater open cut coal mine lies 73km southeast of Emerald on the traditional lands of the Gaangalu people.

Operating since 1967, Blackwater predominantly produces low-ash, low-sulphur metallurgical coal products as well as high energy thermal coal.

These coal products are exported to customers across Asia through the RG Tanna terminal within the Port of Gladstone.

With a strike length of 80km, Blackwater is one of the longest open cut coal mines in the southern hemisphere and exports more than 14mtpa of coal to consumers across Australia and Asia.

Mining at Blackwater is undertaken using a conventional multi-seam dragline strip methodology. Seven draglines are employed in multiple simultaneous pits along the 80km strike in conjunction with a large fleet of trucks, electric rope shovels, hydraulic excavators and dozers.

A separate contract fleet supports pre-strip activities.

Boasting JORC resources of more than 1.83mt and production coal production of 1.18mt coal in the December quarter, Blackwater has an expected mine life spanning more than 50 years.

In December 2023, BMA lodged an application with the Federal Department of Climate Change, Energy, Environment and Water (DCCEEW) to extend Blackwater at the northern end of the mine to allow for an extension to the lift of mine so production can be sustained.

In mid-December, a state application was lodged with the Queensland Department of Environment and Science (DES).

A decision by both DCCEEW and DES is expected by 2025, however, it’s unsure at this time whether Whitehaven will continue with the extension.

Both Daunia and Blackwater will start to contribute to Whitehaven’s earnings and production in the June 2024 quarter.