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- South32 (ASX:S32) enters an agreement to sell Illawarra Metallurgical Coal to an entity owned by Golden Energy and Resources (GEAR) and M Resources
- The transaction involves a total consideration of up to US$1.65 billion, with an upfront cash payment of US$1.05 billion upon completion, a deferred cash payment of US$250 million scheduled for 2030, and a contingent price-linked cash consideration potentially reaching up to US$350 million.
- The agreement is expected to conclude in the first half of fiscal year 2025
- S32 last traded at $2.86
South32 (ASX:S32) has entered an agreement to sell Illawarra Metallurgical Coal to an entity owned by Golden Energy and Resources (GEAR) and M Resources.
The transaction involves a total consideration of up to US$1.65 billion, with an upfront cash payment of US$1.05 billion upon completion, a deferred cash payment of US$250 million scheduled for 2030, and a contingent price-linked cash consideration potentially reaching up to US$350 million.
“Illawarra Metallurgical Coal produces high-quality metallurgical coal, a key ingredient in the production of steel, which will be required until low-carbon steel becomes economically viable on a commercial scale,” South32 CEO Graham Kerr said.
“GEAR and M Resources are established participants in the Australian metallurgical coal industry, with a strong commitment to environmental and safety standards, who are well positioned to continue Illawarra Metallurgical Coal’s contribution to the local steel industry and the Illawarra and Macarthur regions.”
This overall consideration equates to a multiple of 7.2 times the average annual free cash flow for Illawarra Metallurgical Coal.
The agreement is expected to conclude in the first half of fiscal year 2025, and is subject to approval from the Foreign Investment Review Board, regulatory approvals, and the waiver or pre-emption rights held by BlueScope Steel (AIS) Proprietary (BlueScope).
Once completed GEAR will assume economic and operating control of Illawarra Metallurgical Coal, covering all existing and future liabilities.
This move aims to unlock shareholder value and streamline South32’s portfolio, with a focus on key operating positions and growth opportunities in the aluminium value chain, base metals, and manganese.
S32 last traded at $2.86.
