Golden Energy to acquire 80 percent of BHP Mitsui Coal for as much as US$1.35B

U.S. one-dollar currency notes; taken September 2018.U.S. one-dollar currency notes; taken September 2018.

Golden Energy And Resources (GEAR) has entered a deal via subsidiary Stanmore Resources to acquire all of Australian mining giant BHP’s 80 percent interest in BHP Mitsui Coal (BMC) for as much as US$1.35 billion, according to filings to ASX and SGX Monday.

The purchase consideration includes US$1.1 billion at the deal’s completion, US$100 million six months after completion and up to US$150 million based on a revenue-sharing plan, which kicks in if the average sales price tops a threshold over a two-period after the deal’s completion, GEAR said.

ASX-listed Stanmore Resources plans to fund the deal via a partially underwritten offer of shares in Stanmore, a new US$625 million debt facility and internal sources, GEAR said.

PT Sinar Mas Multiartha Tbk (SMMA), an associate of GEAR’s controlling shareholders, has committed to underwrite up to US$300 million of the offer of shares in Stanmore, GEAR said. Indonesia-listed SMMA is the financial services arm of the Sinar Mas Group.

GEAR has also committed for up to US$300 million of the potential share offer, but may satisfy the commitment with a debt facility instead, Stanmore said.

Stanmore also plans to open talks with professional underwriters and third-party investors to underwrite the share offer, the filing said.

Stanmore said the debt facility was arranged with Varde Partners, Canyon Capital Advisors, Farallon Capital Asia and other credit funds.

In a filing to ASX, Stanmore said the deal was transformational, creating a leading global metallurgical coal producer with high quality assets in the Bowen Basin.

Marcelo Matos, CEO of Stanmore, said the deal offered a portfolio of tier-one assets, with significantly increased reserves and resources base, with an expected mine life of more than 25 years’ production.

The BMC assets are nearby Stanmore’s and its MetRes joint venture’s existing operating assets, providing the potential to benefit from shared infrastructure, corporate functions and coal blending, Stanmore said.

The BMC assets include “significant infrastructure,” such as an 8.4Mtpa coal handling and processing plant (CHPP) at South Walker Creek, a 9Mtpa Red Mountain CHPP, two rail loops and train loading facilities, two Marion 8050 draglines and a fleet of excavators, dozers and haul trucks, Stanmore said.

BHP said it will continue operating BMC until completion of the deal, and work closely with Stanmore on transition, including providing some transitional services for a short time post-completion.

BHP President Minerals Australia Edgar Basto said the deal was part of his company’s strategy.

“As the world decarbonises, BHP is sharpening its focus on producing higher quality metallurgical coal sought after by global steelmakers to help increase efficiency and lower emissions,” Basto said in the statement.

The deal is expected to be completed in mid-2022, the filing said.

Completion is contingent on requirements including approval from Australian regulators, and on GEAR’s controlling shareholder, PT Dian Swastatika Sentosa Tbk (DSS) approving the deal, the filing said. DSS’ majority shareholder, PT Sinar Mas Tunggal, has said it will vote in favor of the deal, GEAR said.

Japan’s Mitsui holds the remaining 20 percent of BHP Mitsui Coal.