Wesfarmers will offload its Curragh coal mine assets in Queensland for $700 million in a deal with Coronado Coal Group, following a strategic review of its resources business that may also see it divest from its mining operation in NSW.
The deal represents the first major development for the conglomerate since managing director Rob Scott took the reins from former boss Richard Goyder several months ago and is expected to proceed within six months, subject to the approval of the Foreign Investment Review Board.
Wesfarmers expects to book approximately $100 million in post-tax profit on the sale, which will also see it receive 25 per cent of export coal revenue generated above a benchmark coal price of US$145 per tonne each quarter for the next two years.
“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,” Scott said.
Wesfarmers bought Curragh for $200 million in 2000, which means that the investment will have delivered an after-tax internal return of around 49 per cent per annum over the last 17 years. Scott said Wesfarmers’ 40 per cent stake in the Bengalla coal mine in NSW is also being reviewed.
“I thank the resources team for their outstanding work to ensure Curragh remained a world-class coal producer under Wesfarmers’ ownership, positioning it to benefit from the peaks in coal prices over that time while remaining resilient through the cycle,” Scott, former resources boss, added.
The sale stands to provide Wesfarmers with a cash injection in 2018 at a time were competition in its core retail businesses are heating up, with supermarket chain Coles on the back-foot and Bunnings expanding into the UK.
This story was first published on Inside Retail.