JSW Steel eyes stake worth $1 bn in Australia’s Blackwater coal mine

The companies are yet to decide on the final valuation. If the parties reach an agreement, the deal is expected to close by the end of this financial year, the people said.

A JSW spokesperson declined to comment. Whitehaven did not immediately respond to Mint’s queries.

The news comes shortly after JSW Group’s failed bid to acquire a majority stake in the metallurgical coal business of Canada’s Teck Resources. The stake was later picked up by mining and trading major Glencore.

The deal to acquire a stake in Blackwater could be structured like the Teck deal, one of the persons said.

The development was first reported by The Australian newspaper. Japan’s Nippon Steel is also in the race to pick up a stake in Blackwater, the report said.

Whitehaven Coal chief executive Paul Flynn earlier said that there was “strong interest” to possibly sell a 20% stake in the Blackwater mine to global steelmakers as strategic joint venture partners, The Australian reported.

Whitehaven had acquired Blackwater and Daunia, another coal mine, from BHP in October for a cash consideration of $3.2 billion. At a $1 billion asking price for a 20% stake in Blackwater, the company could see a significant markup in the valuation of the asset in just a few months.

On its part, JSW Steel has set an ambitious target of achieving 50 million tonne a year of steelmaking capacity by the end of this decade from 28 million tonne at present. As the company aggressively ramps up its capacity, it is looking to secure supplies of metallurgical coal for its coal-fired blast furnaces in India.

Coking coal, a key input for steelmaking is found only in trace quantities in India and the country relies exclusively on exports. The key suppliers are Australia, Russia and Canada.

Volatility in prices of the commodity in recent years – triggered more by geopolitics than economics – has created a nightmare for steelmakers. The volatility has also kept their margins exposed to externalities.

Among Indian steelmakers, Jindal Steel and Power, with an investment in Wollongong Coal Ltd in Australia, has access to coking coal through two mines. Despite production challenges, the company is working to ramp up output to use the assets as a hedge against volatile coking coal prices.

On Monday, shares of JSW Steel closed 0.26% lower at ₹818.35 on the BSE, while the benchmark Sensex ended in the green.

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Published: 19 Feb 2024, 04:56 PM IST