SINGAPORE (THE BUSINESS TIMES) – Golden Energy and Resources (Gear) on Monday (Nov 8) announced plans to buy BHP Group’s 80 per cent stake in a joint venture with Mitsui & Co for US$1.2 billion (S$1.6 billion) through its 75.33 per cent-owned subsidiary Stanmore Resources.
The joint venture company, BMC, owns two coal mines in Queensland, Australia with a combined metallurgical coal production of about 10 million tonnes per year, as well as the undeveloped Wards Well coal project. It is 20 per cent owned by Mitsui & Co.
Based on a revenue-sharing mechanism, Stanmore will also pay up to US$150 million for BMC if the average sale price is above a certain threshold after more than two years from completion of the acquisition, which is expected to take place around the middle of next year.
Gear in its bourse filing said it is “fully supportive” of Stanmore’s acquisition of BMC.
The group will also act as Stanmore’s guarantor for the acquisition purchase price as well as up to US$600 million in break-up fees should the deal fall through.
In a Nov 8 press statement, Stanmore said it sees the proposed acquisition as “transformational”.
It estimates about 11 million tonnes of saleable coal from BMC’s assets for the financial year ended June this year.
Due to the close proximity of BMC’s assets to Stanmore’s, the company also believes there is potential to benefit from shared infrastructure, corporate functions and coal blending opportunities.
“This transaction will see the company become one of the leading metallurgical coal producers globally and provide Stanmore with a portfolio of tier 1 assets, with a significantly increased reserves and resources base and assets with an expected mine life exceeding 25 years production, positioning the company for substantial cash-flow generation and future growth opportunities,” said Stanmore chief executive Marcelo Matos.
Shares of Gear were trading up 0.5 cent, or 1.5 per cent, at 34 cents as at 10.32am on Monday, after its announcement.