BlueScope has said it will “consider its position” on whether to match the $2.5 billion offer on South32 Limited’s Illawarra Metallurgical Coal (IMC) in New South Wales.
South32 announced yesterday it had entered into a binding agreement to sell IMC for $US1.65 billion ($2.5 billion) to an entity owned by Indonesia’s Golden Energy and Resources (GEAR) and M Resources.
But BlueScope has first rights to an acquisition of IMC under its eight-year coal supply deal with South32, with M Resources unable to increase its bid should BlueScope come to the table.
“BlueScope has a longstanding supply agreement with IMC out to 2032 for supply of a blend of metallurgical coal from its Appin and Dendrobium mines located in the Illawarra,” BlueScope said in a statement following South32’s announcement.
“BlueScope has ongoing rights under the long-term supply contract, including pre-emption acquisition rights in favour of BlueScope, and the company will consider its position.”
IMC, which feeds the Port Kembla steelworks in Wollongong, currently consumes around 35 per cent of the company’s capital expenditure, with South32 emphasising the significant reduction in its capital intensity should the deal go through.
“This transaction will realise significant value for our shareholders and is consistent with our strategy to reshape our portfolio toward commodities critical in the transition to a low-carbon future,” South32 chief executive officer Graham Kerr said when the announcement of the sale was made.
“GEAR and M Resources are established participants in the Australian metallurgical coal industry, with a strong commitment to environmental and safety standards, who are well positioned to continue IMC’s contribution to the local steel industry and the Illawarra and Macarthur regions.”
Kerr was confident the transition of IMC to M Resources would have little impact on the community or workers across the operation.
“Our focus remains the safe and reliable operation of IMC,” he said. “Over the coming months we will work with the buyer, our workforce, the local community, government, customers and suppliers to support a successful transition of ownership.”
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