BlueScope has waived its pre-emption acquisition rights under the long-term coal supply agreement (CSA) with South32’s Illawarra Metallurgical Coal division (IMC). This move supports the sale of IMC to an entity owned by Golden Energy and Resources Pte Ltd (GEAR) and M Resources Pty Ltd (M Resources). Under the CSA, IMC supplies BlueScope’s Port Kembla Steelworks with a blend of metallurgical coal from its Appin and Dendrobium mines in the Illawarra region (known as the Illawarra Coal Blend).
BlueScope has engaged extensively with GEAR and M Resources and is eager to work with them as the new owners of IMC, continuing the long-term supply relationship with the Port Kembla Steelworks. Demonstrating their commitment to this partnership, GEAR and M Resources have agreed to several enhancements to the CSA. These enhancements include a one-year extension of the contract, now set to expire in 2033, and a commitment to a detailed review process to potentially extend the supply of the Illawarra Coal Blend beyond 2033.
This announcement refers back to the 29th February 2024, when South32 entered into a binding agreement to sell Illawarra Metallurgical Coal. The deal involves an upfront and deferred cash consideration of US$1.3 billion, along with contingent price-linked consideration of up to US$350 million.
“This transaction will deliver significant value to our shareholders and aligns with our strategy to refocus our portfolio on commodities crucial for a low-carbon future,” said Graham Kerr, Chief Executive Officer of South32. “It will streamline our portfolio, bolster our balance sheet, and free up capital for investment in our high-quality copper and zinc development projects. Additionally, this transaction will simplify our business and reduce our capital intensity.”
Illawarra Metallurgical Coal produces high-quality metallurgical coal, an essential component in steel production, which will remain necessary until low-carbon steel becomes commercially viable. GEAR and M Resources, both established players in the Australian metallurgical coal industry with strong commitments to environmental and safety standards, are well-positioned to continue Illawarra Metallurgical Coal’s contributions to the local steel industry and the Illawarra and Macarthur regions.
“Our priority remains the safe and reliable operation of Illawarra Metallurgical Coal,” added Kerr. “In the coming months, we will work closely with the Buyer, our workforce, the local community, government, customers, and suppliers to ensure a smooth transition of ownership.”
