BHP Completes Sale of Another 2 Queensland Mines

BHP announced the proposed sale after it said it would no longer invest in further growth in Queensland due to the state’s significantly high coal royalties.
BHP Completes Sale of Another 2 Queensland Mines
BHP Billiton Chief Executive Andrew Mackenzie is silhouetted against a screen projecting the company's logo at a round table meeting with journalists in Tokyo, Japan June 5, 2017. (REUTERS/Kim Kyung-Hoon/File Photo)

BHP and Mitsubishi Development, through their joint venture BHP Mitsubishi Alliance, have completed the sale of its Blackwater and Daunia coal mines in Queensland to Whitehaven Coal in a deal expected to be worth up to US$4.1 billion (AU$6.3 billion).

“This is a significant milestone for Whitehaven that transforms us into a leading metallurgical coal producer and will deliver benefits for all of our stakeholders,” Whitehaven Coal CEO Paul Flynn said.

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

BHP to Limit Queensland Investments

BHP announced the proposed sale of the two coal mines to Whitehaven in October last year, months after the mining giant said it would no longer invest in further growth in Queensland due to the state’s significantly high coal royalties.

Whitehaven paid BHP Mitsubishi Alliance a US$2 billion cash consideration plus a preliminary completion adjustment of $44.1 million for working capital and other agreed adjustments.

Whitehaven already paid a US$100 million deposit upon the signing of the asset sale agreement last Oct. 18.

Whitehaven is expected to pay BHP Mitsubishi Alliance US$1.1 billion cash over and an additional amount of up to $900 million in a price-linked earnout over three years post-completion.

The price-linked earnout is subject to a cap of US$350 million every year and depends on average realised pricing exceeding the agreed thresholds for each of the three years following the completion.

With the sale, Whitehaven will assume economic and operating control of the mines, including all current and future environmental liabilities and rehabilitation obligations.

“This transaction has delivered a good outcome for the BHP Mitsubishi Alliance, our workforce, and the communities around the Blackwater and Daunia operations,” President of BHP Minerals Australia Geraldine Slattery previously said.

“In line with our long-term strategy, we will continue to develop our high-quality metallurgical coal assets in Queensland, which are sought after by global steelmakers and needed to support the energy transition.”

Whitehaven Investor Opposes Acquisition

The acquisition pushed through despite investor Bell Rock’s opposition. In a submission to the Australian Takeovers Panel, Whitehaven claimed that Bell Rock wrote to the coal company’s shareholders to urge them to vote against the acquisition.
Whitehaven pushed back, saying that Bell Rock did not publicly disclose its interest in compliance with the requirements of the panel’s Guidance Note 20: Equity Derivatives.
Whitehaven also claimed that Bell Rock misled shareholders by stating in a letter to the former’s shareholders that it “manages [just] under 5 percent of WHC stock.”

Union Says ‘Good riddance to BHP’

The Mining and Energy Union said that the sale of the mines is a “good riddance to BHP” as Whitehaven committed to more favourable labour conditions, including retaining all current, directly employed staff and transitioning 400 operations services hire workers to permanent direct employment.

The union also said that BHP was attempting to influence Queensland’s policy when it said it would no longer invest in further growth in the state due to high royalties.

“The sale of Daunia and Blackwater comes after the sale of South Walker Creek and Poitrel mines to Stanmore Coal in 2021,” the union said.

“In reality, the sale of four of its nine Bowen Basin coal mines in the last two years is entirely to do with BHP seeking to exit the coal industry rather than the range of issues BHP publicly complains about, like fairer work laws and royalties. BHP’s employment practices are a major concern to the union.”

Celene Ignacio is a reporter based in Sydney, Australia. She previously worked as a reporter for S&P Global, BusinessWorld Philippines, and The Manila Times.