Western Australia’s major coal mines will be in foreign hands if regulators approve the planned sale of Wesfarmers’ Premier operation to a Chinese miner for $296.8 million.
The diversified conglomerate will trim back its coal business to two mines with the sale of the Premier thermal coal mine in WA’s South West region to Yancoal Australia, a subsidiary of China’s Yanzhou Coal Mining Company.
Wesfarmers spokesman Alan Carpenter said the Perth-based retail and resources group remained committed to its other two coal mines, the Curragh metallurgical and thermal coal project in Queensland and the Bengalla thermal coal operation in NSW.
Mr Carpenter also said it should be business as usual for Premier’s approximately 250 staff and contractors.
“There are obviously some discussions going on there but no expectations of job losses,” he told AAP on Wednesday.
Yanzhou, China’s third largest listed coal company, in January boosted Yancoal’s investment budget in Australia by more than 15-fold to $973 million, from $64 million previously, amid the Asian superpower’s increasing domestic demand for coal.
Wesfarmers first flagged in March that it may sell the Premier mine, saying several parties had expressed interest.
The mine produces about 3.5 million tonnes of thermal coal annually and is the major supplier to WA’s state-owned power generator Verve Energy, which produces about 60 per cent of the electricity for the south-west grid.
The deal follows the sale earlier this year of South West coal assets by debt-laden private firm Griffin Coal to Indian infrastructure company Lanco Infratech for $750 million.
At the time, the Griffin deal was vaunted as the largest investment by an Indian enterprise in Australia to date, but Lanco in June angered WA Premier Colin Barnett when it tried to renege on its contractual obligation to provide coal to the domestic market.
However, Lanco in August pledged to continue to supply coal to the Bluewaters power station, which generates about 10 per cent of the state’s electricity.
Mr Barnett on Wednesday said he expected Yancoal to honour the current contract between Wesfarmers and Verve, but that he was concerned about long term security of supply.
The Premier sale needs approval from Australia’s Foreign Investment Review Board (FIRB) and Chinese government authorities, which would be sought in coming months, Wesfarmers said.
Yancoal in 2009 completed China’s biggest takeover of an Australian firm with the acquisition of Felix Resources for $3.54 billion.
As part of that deal, FIRB imposed strict conditions to address national interest concerns, including that Yancoal must list on the Australian stock exchange by late 2012.
Yancoal operates five mines in NSW and Queensland, including the Austar mine west of Newcastle.
Wesfarmers said it would book a pre-tax profit of about $90 million on the Premier sale, which would likely be included in its results for the second half of the current financial year.
