M Resources, GEAR plan funding round after $1.65bn coal mine buy, source says

22nd March 2024 By: Reuters

M Resources, GEAR plan funding round after $1.65bn coal mine buy, source says

Australian coal trader M Resources and Singapore's GEAR plan a funding round after their $1.65-billion purchase of South32's Illawarra metallurgical coal operations, a source familiar with the matter said.

Golden Energy and Resources (GEAR), owned by the Indonesian Widjaja family, will hold 70% of the Illawarra business, while privately held M Resources will own the rest.

They are expected to tap banks and private credit markets for funds and have hired corporate adviser Grant Samuel to run the process, said the source, who declined to be identified in the absence of permission to talk to the media.

Grant Samuel did not respond to a request for comment.

The source familiar with the matter did not say how much funding M Resources and GEAR were aiming for.

Australian trader and mining services provider M Resources wants to increase its footprint in Australia's steel-making coal sector amid a wave of mergers and acquisitions. BHP sold two Queensland coking coal mines to Whitehaven Coal for $4.1-billion last year.

"We certainly are not afraid of owning a coal mine, operating a coal mine and having bigger stakes in the future," M Resources founder and president Matt Latimore said.

M Resources owns strategic stakes in several coking coal companies for which it also offers marketing and mining services.

Those include GEAR's Stanmore Resources, Bowen Coking Coal and Australian Pacific Coal, as well as rail infrastructure and mining services.

The firm, headquartered in Brisbane, has an international presence, including in China, Singapore and Switzerland.

Latimore said the expansion of middle classes in India, Southeast Asia and Africa, and decarbonisation goals, will drive demand for high-energy Australian coal.

"You have industrialisation and urbanisation in those countries, increasing their demand for steel per capita," he added. "And that requires a big increase in demand for metallurgical coal."

China's appetite for Australian coal has returned, and greater trade flows have opened up since Beijing ended an unofficial ban on Australian coal last year.

"M Resources is also seeing increased demand for Australian coal for steel-making from India and Southeast Asia, including Indonesia," Latimore said.

The Illawarra deal comprises a cash payment of $1.05-billion at completion and a deferred cash consideration of $250-million payable in 2030.

It is set to be completed in the first half of fiscal 2025, subject to conditions such as approval by the Foreign Investment Review Board.