A Curragh Christmas
In case you missed it - Curragh sold for $100 million profit over Christmas
Wednesday 10 January 2018
Wesfarmers has announced over the Christmas break they have sold the Curragh mine at Blackwater to American based Coronado Coal Group for AU$700 million plus a share of future coal sales.
In a reflection of the difficulty of valuing coal mines at the moment given the volatility in coal prices, Curragh has also negotiated to receive 25% of any revenue from Curragh coal sold at prices above US$145 a tonne for the next two years.
If the sale is approved by the Foreign Investment Review Board, Wesfarmers expects a post-tax profit of approximately $100 million.
Curragh is one of the world’s largest metallurgical coal mines, with baseline production of 8.5 million tonnes per annum (mtpa) of export metallurgical coal and 3.5 mtpa of steaming coal sold to the Queensland Government’s Stanwell Power Station.
Wesfarmers Managing Director Rob Scott said the agreement to sell Curragh follows a decision last year to explore options for exiting the resources business.
“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,” Mr Scott said.
“Curragh was acquired by Wesfarmers for approximately $200 million in 2000 when it was producing 4.5 million tonnes 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% per annum over its 17-year life.”
The sale also includes an undeveloped Mining Lease 162 located between the existing Curragh North and Curragh South mining operations.
Three years ago Wesfarmers bought the area from Peabody for $90 million when it was just a Mining Development Licence 162 (MDL) which they have since progressed to a mining lease.
The area contains about 250 million tonnes of mostly steelmaking coal, of which about 70 million tonnes is highly drilled and classified as proven and probable under JORC reporting rules, and can be exploited using existing infrastructure.
Coronado Coal Group is a privately owned company incorporated at the height of the downturn in 2014. It currently has three mines in West Virginia producing 8.2 mtpa.