Shares in Stanmore Resources soared as much as 24% on Monday after announcing a deal to buy low grade metallurgical coal assets from BHP for $A1.8 billion.
The shares topped out at $1.28 in early trading – a year high, then retreated to end up around 14% at $1.18.
BHP shares also rose – up 1.8% at one stage before settling back to end up 0.8% at $36.38.
Punters reckoned Stanmore got a great deal in buying those BHP mines in Queensland (held in a joint venture 80% BHP and 20% Mitsui of Japan which remains in the JV).
But Stanmore – which is valued at just over $270 million – will have to rely on its big Singapore-based investor, Golden Energy and Resources Limited to guarantee Stanmore Resources’ obligations to pay the purchase price and any break fee obligations to BHP up to $US600 million.
Golden Resources in turn is controlled by Indonesian resources and coal mining group, Dian Swastatika Sentosa.
Smart investors though note that BHP is getting rid of the two weakest mines in its Queensland coking coal portfolio – so the shares rose yesterday. The $US1.2 billion cash price will be a handy addition as well.
Stanmore’s two new mines at South Walker and Poitrel sell soft to medium grade coking coal and weak coking/thermal coal used in the pulverised coal injection process (the powdered coal is injected into blast furnaces to keep up temperature and by adding carbon to keep the process at heat). Both types of coal sell for considerably less than the high quality prime hard and hard coking coal from the mines BHP owns with Mitsubishi elsewhere in the Bowen basin of Queensland.
BHP explained the deal in Monday’s statement “As the world decarbonises, BHP is sharpening its focus on producing higher-quality metallurgical coal sought after by global steel-makers to help increase efficiency and lower emissions,” BHP head of Australian mining Edgar Basto said.
“This transaction is consistent with BHP’s strategy, delivers value for our company and shareholders and provides certainty for BHP-Mitsui Coal’s workforce and the local community.
BHP said it would continue to operate the assets until the deal’s completion and would provide “transitional services” to Stanmore for a short period.
South Walker Creek produces around 6 million tonnes and Poitrel produces four million tonnes a year of pulverised coal injection (PCI) grade and semi-hard coking coal for export into Asia.
Meanwhile BHP still has to sell its NSW energy coal mines in the Hunter Valley
“The review process for New South Wales Energy Coal is progressing, in line with the two-year timeframe announced in August 2020. BHP remains open to all options and continues consultation with relevant stakeholders,” the company said in Monday’s announcement.
Last year BHP sold its 33.3% shareholding in the big but troubled Carrejon thermal coal mine in Colombia.
