Wesfarmers (WES) has moved to get rid of its troublesome coal mining interests and become even more focused on its core retailing operations, with some industrial assets attached (and which look certain to be sold in 2017).
Bloomberg reported yesterday that Wesfarmers had started marketing its two Australian coal mines in NSW and Queensland off the back of the big surge in global coal prices in recent months.
The reports suggested Wesfarmers is looking for around $2 billion for the 40% of the Bengalla thermal and soft coking mine in the Hunter Valley region of NSW and 100% of the more productive Curragh high quality coking and thermal coal mine in central Queensland. The sale means that coal mines worth up to $5 billion are on the market in Australia – six months ago, the figures would have been half that, such has been the impact of the surge in hard coking coal prices (now to just over $US300 a tonne), and thermal coal (more than doubled to around $US105 a tonne in recent days ex Newcastle).
Wesfarmers issued a short statement, sort of confirming the story:
"Wesfarmers notes media speculation regarding a potential sale of all or part of its coal assets.
"Wesfarmers has previously disclosed that it is evaluating all strategic options for the Resources business with a view to maximising shareholder value.
"Wesfarmers is continuing to consider a broad range of options, from operational to divestment initiatives, including recently seeking expressions of interest from external parties who may want to acquire the coal assets.
"There is no certainty this process will lead to a transaction and Wesfarmers will update the market further if and when appropriate. " The shares rose 1.2% yesterday to end at $41.
Wesfarmers has sent preliminary information on the Curragh and Bengalla mines to potential buyers ahead of calling for bids.
It is working with its corporate advisors, UBS on the potential divestments.
Late last month, Anglo American’s board recently rejected a bid for its Australian metallurgical coal assets (three mines based in Central Queensland) after deciding the offer was too low given recent price rise. A group led by US investment manage, Apollo was the lead potential buyer with an offer of around $US2 billion, which was rejected.
Curragh, located in Central Queensland’s Bowen Basin, produces about 8.5 million metric tons of metallurgical (hard) coal for the steel industry and 3 million tons of thermal coal a year (mostly for the power and cement industries in Asia).
The 40% Bengalla coal mine in the Hunter Valley, supplies around 6 million tons a year of mostly thermal coal (with small amounts of soft coking coal at times).
Small coal producer New Hope paid around $US606 million ($A800 million) for the 40% sold earlier this year in Bengalla that was owned by Rio Tinto.
Taiwan Power Co. and Japanese trading house Mitsui & Co. each hold 10% stakes in Bengalla and are understood to have pre-emptive rights.
In the year to June Wesfarmers substantially wrote down the value of Curragh because it could not see any sustained recovery in coal prices. The total pre-tax write-down for Curragh mine in central Queensland came in at $2.1 billion, and then coal prices started recovering.
