New Hope Signs Deal for Controlling Interest in Bengalla Coal JV

Australian coal miner New Hope (ASX:NHC) has entered into a deal to acquire Wesfarmers’ (ASX:WES) 40-percent interest in the Bengalla joint venture.

New Hope will pay AU$860 million to receive a controlling interest in the coal project, which is located in Hunter Valley in New South Wales. Currently the company owns 40 percent of Bengalla, which it acquired in 2015 from Rio Tinto (LSE:RIO,ASX:RIO,NYSE:RIO) for US$606 million.

“The acquisition of an additional interest in Bengalla demonstrates New Hope’s long term commitment to the Bengalla mine and a positive outlook for the global export thermal coal market,” Shane Stephan, New Hope’s managing director, said in an announcement.

The newly penned deal is contingent on the other members of the joint venture, Mitsui (TSE:8031) and Taipower, agreeing to the terms during the pre-emptive rights process under the Bengalla joint venture deed. Both Mitsui and Taipower have 10-percent stakes in Bengalla.

New Hope plans to finance the multimillion-dollar deal through a combination of cash and new debt facilities, all subject to Australian regulatory processes. It expects the deal to be completed in late 2018.

Experts have billed the agreement as a positive move for New Hope. Before the deal was announced, some thought the company would end up paying over $1 billion to acquire Wesfarmers’ piece of the pie.

“It’s a cracker of a deal for New Hope … this is one of the best deals I have seen in a long time,” Shaw and Partners analyst Peter O’Connor told the Australian Financial Review.

Aside from upping its stake in Bengalla, New Hope has been working to push forward with an expansion of its New Acland mine. The company has described the mine’s closure as having a “potentially devastating economic impact to the community.”

“New Hope remains committed to securing approval for the continuation of the New Acland mine and in doing so being able to provide ongoing employment for the circa 700 jobs reliant on its operations,” Stephan added in the press release.

New Hope’s share price was up 10.97 percent on Tuesday (August 7), closing the day at AU$3.45.

Don’t forget to follow us @INN_Resource for real-time updates!

Securities Disclosure: I, Georgia Williams, hold no direct investment interest in any company mentioned in this article.