BHP Extends Fossil Fuels Withdrawal With Met Coal Asset Sale

BHP Groupwill sell its 80% stake in the BMC metallurgical coal venture toStanmore Resources a deal worth up to $1.35 billion, extending the global miners withdrawal from fossil fuels.

BMC, which is 20% owned byMitsui & Co. Ltd., has two operating mines in Queensland with a combined output of about 10 million tons of coal a year, as well as the undeveloped Wards Well project. Stanmore, which is majority owned by SingaporesGolden Energy & Resources Ltd., will pay $1.2 billion in cash with a potential follow-up payment of up to $150 million after two years linked to the performance of coal prices.

This transaction is consistent with BHPs strategy, Edgar Basto, head of BHPs Minerals Australia business, said in a statement. As the world decarbonizes, BHP is sharpening its focus on producing higher quality metallurgical coal sought after by global steelmakers to help increase efficiency and lower emissions. The global miner will retain exposure to steelmaking coal through its BHP-Mitsubishi Alliance venture, which is Australias top producer.

BHP in Augustannounceda deal to sell its oil and gas operations toWoodside Petroleum Ltd. in exchange for shares that it will distribute to its own investors. The company said Monday it was continuing the review process for its New South Wales thermal coal operation and remained open to all options.

The Melbourne-based miners decision-making around coal was not any push towards becoming fossil-fuel free, Chief Executive Officer Mike Henry said at the groups annual meeting in London last month. It was simply a cold-eyes assessment of how those commodities fit with the BHP portfolio. The company in June agreed to sell its stake in the Cerrejon thermal coal mine in Colombia toGlencore Plc for about $294 million.

BHPs strong free cashflow and conservative balance sheet meant proceeds from the BMC sale could be given back to shareholders via a special dividend, Kaan Peker, RBC Capital Markets analyst, said in a note. BHP was likely to exit its remaining thermal coal assets over the next 18 months, he said, with a trade sale the preferred route.

The sale was criticized by shareholder activist group, the Australasian Centre for Corporate Responsibility.

Rather than make the hard decisions to wind these assets down, BHP is running for the door, Dan Gocher, director of climate and environment at the group, said in a statement. Along with the proposed BHP petroleum merger with Woodside, these are not the actions of a climate leader. BHP should retain these assets and decline production in keeping with a 1.5C pathway.

Brisbane-based Stanmore, which produced around 2.6 million tons of metallurgical coal in fiscal 2021, operates the Isaac Plains complex, also in Queensland, and has environmentalapproval to develop the adjacent Isaac Downs project.

Completion of the BMC deal, which requires sign off from Australias Foreign Investment Review Board, is expected around the middle of 2022. BHP shares rose as much as 1.8% in Sydney following the announcement, while Stanmore jumped up to 24%, its highest in more than two years.