Ann: June 2024 Quarterly Report, page-120

Nice introduction of Whiehaven into this afternoons AFR article.
It would be a huge win.

The Boggabri mine would be valued at more than $1.1 billion if the sale of Chugoku’s 10 per cent stake is completed on the terms anticipated in documents filed with the corporate regulator. Chugoku told the Australian Securities and Investments Commission that the transaction with an unnamed suitor was sufficiently progressed to warrant the stake being recorded as an “asset held for sale” valued at $111.1 million.

Boggabri mostly produces thermal coal for power generation and is 80 per cent owned by fellow Japanese company Idemitsu, with Nippon Steel owning the other 10 per cent.

The Boggabri coal mine in NSW is owned by three Japanese companies. Dallas Kilponen

The three Japanese companies this week applied to federal regulators for permission to extend the mine life at Boggabri by an extra four years to 2040.

Japanese companies were the original investors in the Australian coal industry and bought $22 billion worth of local thermal coal last year; more than the next four biggest customers combined. But Japanese companies like Mitsubishi, Mitsui, Idemitsu and Itochu have completed a slew of asset sales in the Australian coal sector over the past eight years as the nation tries to reduce greenhouse gas emissions.

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Bruce Adkins, a mergers and acquisitions partner at Johnson Winter Slattery, said the trend was clear.

“Japanese ownership of Australian coal assets was very stable in the first couple of decades of my career, but for some years now we have seen a succession of different Japanese groups exiting Australian coal assets that were previously, for them, strategic interests,” he said.

Japan imported 127 million tonnes of thermal coal last year, down 10 per cent on the previous year because of mild weather and increased nuclear power consumption.

The Department of Industry expects Japanese thermal coal imports to decline further to 114 million tonnes by 2026 as the nation tries to wean itself off fossil fuels.

South Korea appears to be following Japan’s lead, with a Korean government official telling The Australian Financial Review this week that coal consumption would fall quickly as the nation pivots toward nuclear power.

But rising coal demand from India and other South East Asian nations is expected to offset the reduced demand from Japan and South Korea in the short term, with the department predicting Australian thermal coal exports would rise from 202 million tonnes in 2023 to 212 million tonnes by 2026.

Chugoku’s plan to exit Boggabri creates a dilemma for the two companies that are the natural buyers of the stake: Idemitsu and Whitehaven.

Idemitsu owns 80 per cent of Boggabri mine and is understood to have first rights of refusal over the stake, but has been trying to pivot away from coal toward investments in Australian green hydrogen and lithium exploration projects.

Idemitsu sold its 85 per cent stake in Queensland’s Ensham coal mine last year and also ceased coal mining at Muswellbrook in 2022, where it hopes to build a pumped hydro and renewable power generation hub.

Chugoku could not be reached for comment. Idemitsu declined to comment.

Whitehaven mines coal on both the northern and southern borders of Boggabri mine – at Maules Creek and Tarrawonga mines respectively – meaning it could potentially achieve lucrative efficiencies if it took ownership of Boggabri and consolidated it into the broader Gunnedah basin coal district.

Whitehaven’s Vickery mine is about 20 kilometres south of Boggabri and its Narrabri underground mine is about 30 kilometres west of Boggabri.

The Tarrawonga mine was a joint venture between Whitehaven and the Boggabri partners until 2017, when Whitehaven bought out the Japanese companies.

But Whitehaven’s appetite for further acquisitions may be sated for now, with the company finalising the $6.4 billion acquisition of BHP’s Daunia and Blackwater mines.

The BHP deal has left Whitehaven with $1.3 billion of net debt, and managing director Paul Flynn said last week the company would not bid for the Queensland coking coal mines that Anglo American is trying to sell.

While fewer companies were willing to buy thermal coal assets than coking coal assets, Mr Adkins said there were “still buyers out there for decent quality thermal assets.”

“The [coal] industry can see the move away from fossil fuels is not going to happen as quickly as perhaps the politicians and green groups might like people to think,” he said. “There is going to be really good returns to be made from existing operating assets, particularly if they have long approval dates ahead of them.”