Speculation is mounting that Coronado Global Resources Inc. (ASX:CRN) has been in bilateral talks with South32 Limited (ASX:S32) about an acquisition of the latter's $1 billion-odd Illawarra Metallurgical Coal operations. Coronado has staged an exit from the contest for BHP's two Queensland coal mines, Daunia and Blackwater, expected to sell for more than $3 billion ($4.6 billion) combined. While delivering its recent result, South32 chief executive Graham Kerr said South32 was not running a sale process for the asset, but that "everything's for sale at the right price".

Mr. Kerr said there were currently a limited number of buyers in the market, when asked whether the group would wait until the BHP coal sale had concluded. The responses were in the context of speculation that South32 will once again be weighing a sale, as flagged by DataRoom last week. Coronado said in its half-year result this month that its strong balance sheet meant it could pursue inorganic opportunities, but was mindful that global economies and markets could be volatile, and any acquisitions would not sacrifice the company's financial strength and stability.

After vying for BHP's coal mines in its Macquarie Capital-advised contest, Coronado withdrew, with the talk being that prices were too lofty for the group, despite operational synergies with owning the larger Blackwater asset that produces thermal and metallurgical coal, with its own Curragh open-cut coal mine 30km north in central Queensland. Private equity firm Energy & Minerals Group owns about 50% of Coronado and, based in Houston, it had been angling for a sale of Coronado to Peabody Energy last year before the talks collapsed. Coronado produces metallurgical or coking coal used to make steel from its Curragh operations in Queensland, and from two US mines.

Illawarra Metallurgical Coal operations are in the Illawarra and Macarthur regions of the southern coalfields of NSW, about 75km south of Sydney. The asset produces 5,497 kilotonnes of premium-quality hard coking coal annually at its Appin and Dendrobium underground mines for steelmaking within Australia and around the world. Earlier, expectations were that the operation could be worth more than $1 billion, and there was chatter about a year ago that a sale by South32 was on the agenda.