Whitehaven Coal to sell a 30% interest in Blackwater for $1.6b

Four months after acquiring the Blackwater mine, Whitehaven Coal (ASX: WHC) has entered two binding agreements to sell a 30% interest in it for $1.6b (US$1.06b).

Nippon Steel Corporation will acquire a 20% interest while JFE Steel Corporation will acquire the other 10% with the transactions expected to be complete in Q1 2025, subject to customary competition and regulatory approvals.

Nippon Steel executive vice president and representative director Takashi Hirose commented on the purchase.

“Having a secure supply of high-quality coking coal supports us to stabilise profits and build a more resilient Nippon Steel, fully utilising our technological advantages,” he said.

JFE Steel executive vice president Hiroyuki Ogawa echoed Mr Hirose’s comments.

“As a long-term user of Blackwater’s steelmaking coal, we are pleased to enter a strategic joint venture with Whitehaven to acquire a 10% interest in the Blackwater mine,” he said.

“Our investment secures stable supply of high-quality coking coal from Blackwater, thereby underpinning our commitment to decarbonisation through our innovative technologies, such as the carbon-recycling blast furnace.”

On completion of both transactions, Blackwater will be owned by Whitehaven, Nippon Steel and JFE Steel via an unincorporated joint venture. Whitehaven will manage the joint venture.

Whitehaven managing director and chief executive Paul Flynn says the company is delighted to have Nippon Steel and JFE Steel on board as joint venture partners.

“As long-term customers of Blackwater, their [Nippon Steel and JFE Steel] co-investment reflects the importance of Blackwater metallurgical coal in the seaborne market,” he said.

“We look forward to working with our new partners as we continue to unlock opportunities at the operation.”

Whitehaven acquired both the Blackwater and Daunia mines from BHP (ASX: BHP) and Mitsubishi Development in early April 2024 for a cash consideration of $2.96b (US$2b) plus a preliminary completion adjustment of $65.33m (US$44.1m) for working capital and other adjustments.

There remains a cash payment of $1.63b (US$1.1b) over the next three years.

FY24 underpinned by Blackwater and Daunia acquisition

Whitehaven has also released its FY24 results, with the company reporting underlying earnings before interest, tax, depreciation and amortisation of $1.4b. This is down 65% from the $3.96b recorded in FY23 which the company credits to operational challenges at the Narrabri underground mine during the year.

The company tabled capital expenditure of $454m for the financial year, with funds going to maintain safe and productive operations, construction, mining activities and progression works.

Run-of-mine (ROM) coal production of 25.4mt and sales of produced coal of 19.5mt increased by 40% and 25%, respectively, compared with FY23, driven by the acquisition of Blackwater and Daunia, plus more consistent production from Maules Creek.

“FY24 has been a pivotal year for Whitehaven as we are transforming the business through the acquisition of Daunia and Blackwater,” Mr Flynn said.

“The highly attractive acquisition has diversified Whitehaven and brings with it scale benefits and significant value upside for our shareholders.

“The business is very well positioned to continue to deliver strong returns for shareholders from both the metallurgical and thermal coal business.”

In FY25, Whitehaven expects managed ROM coal production to be between 35 – 39.5mt, and managed coal sales to be in the range of 28 – 31.5mt. Capital expenditure is expected to be between $440m – $550m.