JSW Steel to buy 66.67% in Australian coking coal miner for $170 million

JSW Steel will acquire the controlling stake in an Australian miner for $170 million as India’s largest steelmaker seeks to secure the supply of coking coal—a key raw material that is scarce in India—to meet its expansion plans.

The company’s board approved to pay $120 million for a 66.67% stake in M Res NSW HCC Pty Ltd, according to an exchange filing by the steel unit of the $23-billion JSW Group on Monday. It will also commit to an additional payout of $50 million by 2030 to cover part of a deferred payment to be made by the miner.

“Raw material security and cost optimisation remain a key strategic priority for the company and this acquisition is a step forward in achieving those objectives,” JSW Steel said in the filing. “These mines have total marketable reserves of 99 metric tonnes of prime hard coking coal and have produced on an average 6.5 mtpa (metric tonnes per annum) in the past 5 years."

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Capacity expansion

Indian steelmakers mostly import coking coal from Indonesia, the USA, Russian and Australia because of scarce reserves of premium quality in the country. Improved supply of the raw material will be crucial for JSW Steel as it plans to boost its steel capacity from 28.5 mtpa to 37 mtpa by FY25 and to 50 mtpa by 2030.

In May, JSW Steel said it will buy 92.19% stake, along with shareholder loans, from Mozambique-based mining company, Minas de Revuboe (MDR) for $73.75 million. The steelmaker had said the deal would provide access to more than 800 metric tonnes of premium hard-coking coal reserves in Mozambique.

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Its latest target, M Res NSW, is owned by Matthew Latimore, who founded M Resources Pty Ltd, a global mining, investment, marketing and trading company based out of Australia. JSW Steel, through its wholly owned subsidiary JSW Steel (Netherlands), will subscribe to non-voting Class B shares of M Res NSW.

The Australian miner holds a 30% stake in Golden M NSW Pty Ltd, the proposed ultimate owner of Illawarra Coal Holdings Pty Ltd that owns Appin and Dendrobium coking coal mines and the associated infrastructure in New South Wales, Australia. 

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JSW Steel plans to enter into a market-linked offtake contract with Illawarra Metallurgical to purchase hard-coking coal in proportion to its indirect economic interest in Golden M and its subsidiaries.