Wesfarmers hits paydirt with mine sale

WESFARMERS’ new chief Rob Scott has made his first move to reshape the conglomerate, selling a major coal mine for $700 million.

Wesfarmers yesterday announced it would sell its Curragh coking coal mine in Queensland to US miner Coronado Coal Group.

The deal is the first to be executed by Mr Scott, a former Olympic rower who took over running the $50 billion retail, industrial and mining conglomerate in November from former chief Richard Goyder.

Mr Scott has previously told investors that change is the only constant at Wesfarmers and he expects the conglomerate to look very different in 10 years time to how it is today.

The move to sell Curragh will leave Wesfarmers with one remaining coal mine, the Bengalla thermal operation in NSW. Mr Scott yesterday said the company’s 40 per cent stake in that mine remained under “strategic review”.

Curragh is one of the world’s largest metallurgical coal mines, producing about 8.5 million tonnes of coking coal and 3.5 million tonnes of thermal coal used for electricity generation. Wesfarmers will collect 25 per cent of its export revenue on all sales generated at a coal price above $US145 per tonne for the next two years.

Prices for coking coal, used to make steel, are sitting around $US240 a tonne.

Morgan Stanley analyst Thomas Kierath said the mechanism was likely to be worth $242 million over its two-year lifespan, meaning Wesfarmers was set to pick up $942 million for the mine.

Morgan Stanley values Curragh at $900 million.

“The sale will further strengthen Wesfarmers’ balance sheet,” Mr Kierath said.

Wesfarmers bought Curragh for $200 million in 2000. Mr Scott said the mine will have delivered an after-tax internal rate of return of 49 per cent per annum over that time.