South 32 has cleared one of the final hurdles in its sale of its Illawarra Metallurgical Coal assets in New South Wales.
In its latest update, South32 announced the sale has received Australian Foreign Investment Review Board (FIRB) approval.
An entity owned by Indonesian-based Golden Energy and Resources (GEAR) and Brisbane-based M Resources is set to snap up the assets.
The FIRB reviews foreign investment proposals on a case-by-case basis. This is to ensure a proposed investment does not compromise Australia’s national interests or security.
With approval by the FIRB now confirmed, South32 can move ahead with the deal, which is expected to be completed by the end of the year, subject to the receipt of the remaining foreign merger clearances.
The transaction comprises a deferred cash consideration of $US250 million ($385 million), payable in 2030, and is contingent on a price-linked cash consideration of up to $US350 million ($539 million).
At the time the deal was first announced in February, South32 chief executive officer Graham Kerr said the sale will significantly reduce the company’s capital intensity.
Illawarra Metallurgical Coal currently comprises 35 per cent of the company’s capital expenditure.
“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,” Kerr said.
“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.
“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.”
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