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Coronado Coal Group purchases Curragh coal mine

Published by , Assistant Editor
World Coal,

Wesfarmers has agreed to sell its Curragh coal mine in Queensland to Texas-based Coronado Coal Group for AUS$700 million under an agreement which also includes a value share mechanism linked to future metallurgical coal prices.

On successful completion of the transaction, Wesfarmers estimates it would report a post-tax profit on sale of approximately AUS$100 million.

Reflecting recent volatility in spot coal prices. Wesfarmers will also receive 25% of Curragh’s export coal revenue generated above a realised metallurgical coal price of US145/t, paid quarterly over the next two years.

Curragh is one of the world’s largest metallurgical coal mines, with baseline production of 8.5 million tpy of export metallurgical coal and 3.5 million tpy of steaming coal which is sold to the Queensland Government’s Stamwell Corp. The proposed transaction includes the Curragh mine assets and Mineral Development License 162.

Coronado Coal Group is a leading US producer of metallurgical coal with three mining complexes in West Virginia and Virginia currently producing 8.2 million tpy. The sale is subject to a number of conditions precedent including obtaining approval from the Foreign Investment Review Board. Work is underway to achieve satisfaction of the conditions precedent in the next six months.

Wesfarmers Managing Director, Rob Scott, said the agreement to sell Curragh follows Wesfarmers’ disclosure last year that it was evaluating all strategic options for the Resources business with a view to maximising shareholder value. The strategic review of Wesfarmers’ 40% interest in the Bengalla coal mine is ongoing.

“We believe this agreement with Coronado is in the best interests of our shareholders, while giving the employees and customers of Curragh the opportunity to work with a leading coal producer with ambitions to expand in Australia,” said Scott.

Curragh was acquired by Wesfarmers for approximately AUS$200 million in 2000, when it was producing 4.5 million t of metallurgical and thermal coal. On disposal of the asset, the investment will have delivered an after-tax internal rate of return of approximately 49%/yr over its 17-year life.

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Australia coal news