PERTH (miningweekly.com) – Diversified miner South32 has made its first acquisition since demerging from major BHP Billiton, spending $200-million on US major Peabody Energy’s Metropolitan mine and its 16.67% stake in the Port Kembla coal terminal, both in New South Wales.

“The Metropolitan colliery is a natural fit within our portfolio and the acquisition is consistent with our strategy to invest in high-quality mining operations where we can create value,” South32 CEO Graham Kerr said on Thursday.

“The mine’s recently upgraded infrastructure and close proximity to Illawarra metallurgical coal will enable us to further optimise performance and unlock unique blending and resource synergies.”

The Metropolitan colliery underground mine has a production capacity of 2.3-million tonnes a year, with a 28-million-tonne proven and probable coal reserve. The mine produced two-million tonnes of saleable coal in 2015.

The project has an on-site processing facility with a capacity of 480 t/h, and the export coal is transported through the Port Kembla coal terminal, while domestic coal is transported via rail to domestic steelworks.

The project employs about 250 staff.

In addition to the $200-million consideration, which will be funded from existing cash reserves, the two companies will also share additional cash flow on a 50:50 basis, should metallurgical coal prices exceed an agreed forward curve.

The contingent value mechanism is based on coal sales from the Metropolitan colliery in the first 12 months following the completion of the transaction, or a minimum 1.3-million tonnes, and refers to an agreed metallurgical coal price forward curve.

Peabody president and CEO Glenn Kellow said the transaction was consistent with the company’s strategy to strengthen the Australian portfolio.

"We expect the transaction to be accretive to the value reflected in the business plan, generate meaningful proceeds for the Australian business, decrease future capital expenditure needs, and reduce risk to the Australian platform as we pursue a smaller but more profitable portfolio going forward,” Kellow said.

The transaction is not expected to have any impacts on the mine staff, workforce or community.

The deal, which is subject to Australian Competition and Consumer Commission approval, is expected to close in the March quarter.

South32 demerged from BHP Billiton in May 2015. Besides coal, South32 also has operations producing bauxite, alumina, aluminium, manganese, nickel, silver, lead and zinc in Australia, South Africa and South America.