South32 has reached an agreement to sell its Illawarra Metallurgical Coal business entity to Golden Energy and Resources and M Resources. The deal consists of an upfront cash payment of $1.05 billion, with an additional deferred sum of $250 million payable in 2030. Furthermore, there will be a further $350 million over five years contingent on market prices meeting specific thresholds.
Focus on High-Quality Projects
In line with its strategy to produce essential metals for the energy transition, South32 recently approved the development of a $2.16 billion zinc, lead, and silver mine in the U.S. The sale of the coal business aims to streamline the company’s portfolio, strengthen its balance sheet, and unlock capital for investments in copper and zinc projects.
Creating Value for Shareholders
The CEO, Kerr, stated that the transaction will deliver significant value for shareholders, with the deal representing approximately 7.2 times the average annual free cash flow for the Illawarra Metallurgical Coal operation. The completion of the sale is expected in the first half of fiscal 2025.
Impairment Reversal and Liabilities
As a result of the sale, South32 anticipates a non-cash impairment reversal of up to $370 million after tax in its fiscal 2024 results. The buyer, M Resources, will assume all current and future liabilities associated with the operation.
The Illawarra Metallurgical Coal operation in New South Wales will be under new ownership, allowing South32 to refocus its resources on high-quality development projects while maintaining a robust balance sheet.
