By Rhiannon Hoyle

South32 said Thursday it has agreed to sell its Illawarra Metallurgical Coal business entity owned by Golden Energy and Resources and M Resources.

The deal includes an upfront cash payment of $1.05 billion as well as a deferred sum of $250 million--payable in 2030--and a further $350 million over five years that is contingent on market prices reaching agreed thresholds.

South32 has been seeking to produce more of the metals it expects will be needed during the energy transition. In February, it approved the development of a $2.16 billion zinc, lead and silver mine in southern Arizona in the U.S.

The coal sale "will streamline our portfolio, strengthen our balance sheet and unlock capital to invest in our high-quality development projects in copper and zinc," said Kerr.

It will also "realize significant value for our shareholders," he said. The deal value equates to a multiple of roughly 7.2 times average annual free cash flow for the operation, South32 said. It is expected to be completed in the first half of fiscal 2025.

The Illawarra Metallurgical Coal operation, in Australia's New South Wales state, will

M Resources, which also has an interest in Stanmore, specializes in trading metallurgical coal for steel manufacturing.

South32 said the sale will result in a non-cash impairment reversal of up to $370 million after tax in its fiscal 2024 results. All current and future liabilities will be taken on by the buyer, it said.

Write to Rhiannon Hoyle at

(END) Dow Jones Newswires

02-28-24 1710ET