One of the largest diversified companies in Australia has exited the coal industry, with a multi-million dollar sale of its stake in a joint venture.
Wesfarmers announced in a statement this week that it has entered into an agreement to sell a 40% interest in the Bengalla Joint Venture, a thermal coal mine jointly owned by New Hope Corporation.
The 40% stake has been valued at $860 million, with Westfarmers expecting to report a pre-tax profit on the sale of around $670-$680 million.
The Bengalla mine supplies domestic and export markets with thermal coal from its open cut mining operation south west of Muswellbrook in the Hunter Valley region of NSW. It has regulatory approval for up to 15 million tonnes per annum run-of-mine capacity. Bengalla’s coal is used for power generation and is exported primarily to customers based in Japan and North Asia.
It is currently owned 40% by Wesfarmers, 40% by New Hope, 10% by Taipower and 10% by Mitsui. The sale of Wesfarmers stake is set to be completed by Q4 of 2018, with Wesfarmers continuing to profit from earnings and cashflow from Bengalla until completion.
The sale of its stake in Bengalla follows the completion of the sale of the Curragh coal mine to Coronado Coal in March this year and Wesfarmers Managing Director Rob Scott is the final step in an overall review of the Wesfarmers resources businesses initiated in 2016.
“We believe this agreement with New Hope is in the best interests of our shareholders and ensures a smooth transition in the ownership structure of the Bengalla joint venture,” Mr Scott said.
“Bengalla has made strong returns for Wesfarmers shareholders since our initial interest was acquired in 1991 and it is pleasing the extensive, disciplined and patient review of our coal businesses has resulted in outcomes which reflect the value of these world-class assets”.