Whitehaven Coal Signs $1.08 Billion Mine Stake Sale as Profit Slides — Update

By Rhiannon Hoyle

Whitehaven Coal said it has signed deals to sell a 30% share in a newly acquired Australian coal mine to a pair of Japanese steelmakers for $1.08 billion, as it recorded a sharp fall in annual profit in big part because of a halving in coal prices.

The Australian coal producer on Thursday said Nippon Steel and JFE Steel, both long-term customers of the Blackwater metallurgical coal mine, will buy a 20% and 10% stake, respectively, in that operation, in deals that Whitehaven said will strengthen its balance sheet.

Whitehaven announced the agreements as it said its net profit fell by 87% to 355 million Australian dollars ($239 million) in the year through June, reflecting a pullback in coal prices from record-high levels and higher production costs that more than offset a jump in output.

Directors declared a final dividend of 13 Australian cents a share, taking its total payout to 20 Australian cents for fiscal 2024. A year ago, it paid a final dividend of 42 Australian cents, for a total fiscal 2023 payout of 74 Australian cents.

Coal prices surged to an all-time high in that year-prior period, fanned by concerns about energy security following Russia's invasion of Ukraine. Prices for the commodity have since eased as markets adjusted.

Whitehaven reported an average thermal-coal price of A$140 a metric ton for fiscal 2024, down from A$305 a ton in the year-prior period.

The company said its unit costs also increased because of lower volumes from its Narrabri operation and broader inflation pressures.

The purchase of Blackwater and another mine, Daunia, from BHP Group and Japan's Mitsubishi in April boosted production and sales. The miner last month reported saleable coal production of 20.7 million metric tons for the year, which compared to 15.7 million tons during the 12 months before.

Whitehaven has sought to expand its business by betting on metallurgical coal, used in steelmaking, which it expects will be in high demand for renewable-power infrastructure in the energy transition.

The miner previously said it intended to find a strategic partner in the steel industry for a stake in the massive Blackwater coal-mining operation in Queensland state.

"Today's announced $1.08 billion, 30% equity sell down in the Blackwater mine to two long-term customers, firmly validates the value of the acquisition and demand for Blackwater metallurgical coal," said Chief Executive Paul Flynn.

Whitehaven has entered supply deals for Blackwater coal with Nippon Steel and JFE Steel, with whom it will own the mine via a joint venture. Whitehaven will manage the joint venture.

The supply agreements take into account each steelmaker's equity interests and historical demand for Blackwater coal, and include market-based pricing mechanisms, the miner said.

"The proceeds from the sell down will further strengthen Whitehaven's balance sheet, providing enhanced flexibility as we assess the range of competing opportunities for capital," Flynn said.

Whitehaven expects to complete the deals to sell the stakes in the first quarter of calendar year 2025.

Write to Rhiannon Hoyle at rhiannon.hoyle@wsj.com

(END) Dow Jones Newswires

August 21, 2024 20:11 ET (00:11 GMT)

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