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Energy

Korea Resources seeks sale of Australia coal mine to slash debt

Jan 06, 2021 (Gmt+09:00)

Arial view of the Wyong Areas coal mine (Courtesy of Wallarah 2 Coal Project website)

Korea Resources Corp. is planning to sell its 82.25% stake in a coal mine in Australia, as part of efforts to cut its debt totaling 6.7 trillion won ($6.1 billion) as of the end of June last year.

Last week, the government-owned body announced an invitation for bids on a stake in the Wyong Areas coal mine joint venture, to comply with South Korean government instructions to offload all its overseas assets as soon as possible. 

It hired Lee & Ko, a law firm, as the sale manager and will receive bids until the morning of April 22, according to the company and industry sources on Jan. 5.

“In the sale process, SK Networks and Kyungdong may offer their shares as well,” said a Korea Resource official.

SK Networks has an 8.5% stake in the joint venture and Kyungdong, a Korean mine developer, 4.25%. Australian private entity Centennial Wallarah Pty holds the remaining 5.0% stake.

The Wyong Areas coal mine, 80 km north of Sydney, has 1.2 billion tons of thermal coal and an annual extraction capacity of up to 5 million tons.

Korea Resources secured a minority stake in the coal joint venture, which won exploration licenses in 1995 from the New South Wales government. 

In 2005, the state-run organization acquired an additional 78% stake held by BHP Billiton for A$16.4 million. It received the mining lease in 2019.

The rapid transition away from fossil fuels, however, overshadows the outlook for global coal demand, which could lead to a drop in the coal mine's selling price.

A resource industry source voiced opposition to any hasty sale of the mine.

“The Wyong mine may be difficult to sell at the right price. But given its productivity, we may need to think about how to utilize its resources directly,” he said.

Since last year, the South Korean ruling party has been seeking to ban state-run institutions, including Korea Electric Power Corp., from financing foreign coal power projects. The proposed bill has not been passed by parliament yet. 

Separately, Hanwha Group’s six financial units, including Hanwha Investment & Securities Co. and Hanwha Asset Management Co., agreed on Tuesday not to provide project financing for coal power plants both at home and abroad, nor underwrite bonds issued to finance the construction of coal plants, nor provide them insurance coverage.

Write to Soo-Young Seong and Hyun-Woo Lim at syoung@hankyung.com

Yeonhee Kim edited this article.

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