......What will the 20% sell of Blackwater sell for ?.....The...

......What will the 20% sell of Blackwater sell for ?.....

The recently announced sale by South 22 of its Illawara met coal operation for US$1.65 billion including deferred/contingent amounts was for a 5.5 million tpy operation. Blackwater is 16 million tpy so 20% is 3.2 million tpy. A price equivalent to the Illawara deal would be US$950 million for 20% of Blackwater. Obviously lots of variables like coal quality, inventory amounts or adjustments, corporate entity purchase vs. asset purchase, etc.

WHC were asked about expected pricing in recent H1 conference call Q&A (you can read the transcript of this on the WHC website) and made it pretty clear they expect more than their original purchase price. Roughly, the WHC purchase price for Daunia/Blackwater including deferred payments, but excluding any working capital requirements which could be substantial, pro-rated on production volumes is US$650 million for 20% of Blackwater.

My view is that a 20% managed share of Blackwater will sell at a sizable premium to the original purchase price and I will be a little surprised if it is much less than the Illawara sale valuation. As a result I will not be surprised if the Blackwater 20% goes for US$1 billion. Enough to pay off virtually all of the upfront financing required.