(Alliance News) - South32 Ltd on Thursday said it agreed to its Illawarra metallurgical coal asset to an entity owned by Golden Energy & Resources Pte Ltd and M Resources Pty Ltd for a total USD1.65 billion.

Perth, Australia-based diversified mining group South32 said this transaction will consist of USD1.05 million in upfront cash, payable upon completion, alongside a deferred USD250 million in cash payable in 2030 and a contingent price-linked cash consideration of up to USD350 million.

South32 said the total transaction value represents a multiple of approximately 7.2 times of average annual free cash flow for Illawarra.

The transaction is expected to complete in the first half of its financial 2025, subject to conditions. South32 said the buyer will assume economic and operating control of Illawarra on completion of the transaction, including all current and future liabilities.

"This transaction will realise significant value for our shareholders and is consistent with our strategy to reshape our portfolio toward commodities critical in the transition to a low-carbon future. It will streamline our portfolio, strengthen our balance sheet and unlock capital to invest in our high-quality development projects in copper and zinc. The transaction will also simplify our business and reduce our capital intensity," said Chief Executive Officer Graham Kerr.

"Illawarra Metallurgical Coal produces high-quality metallurgical coal, a key ingredient in the production of steel, which will be required until low-carbon steel becomes economically viable on a commercial scale. GEAR and M Resources are established participants in the Australian metallurgical coal industry, with a strong commitment to environmental and safety standards, who are well positioned to continue Illawarra Metallurgical Coal's contribution to the local steel industry and the Illawarra and Macarthur regions."

Kerr continued: "Our focus remains the safe and reliable operation of Illawarra Metallurgical Coal. Over the coming months we will work with the buyer, our workforce, the local community, government, customers and suppliers to support a successful transition of ownership."

Shares in South32 were up 4.2% to 149.60 pence each in London on Thursday late morning.

By Greg Rosenvinge, Alliance News senior reporter

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