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Wesfarmers to divest last coal asset with New Hope Corporation

Coal News - Published on Fri, 04 May 2018

Image Source: wikimedia reported that Wesfarmers Ltd may soon divest its last remaining coal asset. According to the Australian Financial Review, analysts at Macquarie Group Ltd expect the conglomerate to sell its 40% stake in the Bengalla coal project to New Hope Corporation Limited for over AUD 1 billion.

Wesfarmers’s resources portfolio was the subject of a strategic review that led to the sale of the Curragh coal mine to Coronado Coal Group for AUD 700 million in December 2017. In Macquarie’s view, the fact that Wesfarmers recently reported results excluding its resources business is a sign that the company is ready to exit from coal.

The last obstacle that may have held up the sale of Bengalla was an ongoing legal dispute between the Bengalla joint venture and MACH Energy, who owns the neighbouring Mt Pleasant project. That dispute was settled last week.

The acquisition would be earnings accretive for New Hope, assuming 60% would be funded with equity. The coal miner had a AUD 353 million cash balance at January 31.

New Hope is already one of the Bengalla joint venture partners, with a 40% interest acquired in 2016 from Rio Tinto Limited for AUD 865 million.

The stake in Bengalla proved vital for New Hope, with a surge in the mine’s production allowing them to post a strong half-year result in March, despite the contraction of output from the New Acland project in Queensland.

New Hope’s plans for the expansion of New Acland were halted by an adverse ruling of the Queensland Land Court, but the company successfully appealed the decision: today, the Queensland Supreme Court ordered that the matter would be referred back to the Land Court for further consideration.

At the time of writing, shares in New Hope are trading flat at AUD 2.12.

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Posted By : Nanda Koijam on Fri, 04 May 2018
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