MENU

Wesfarmers Ltd offloads its Curragh coal mine for $700 million

The Wesfarmers Ltd (ASX: WES) share price will be one to watch on Friday after it announced the sale of it Curragh coal mine in Queensland.

According to the release, Wesfarmers has agreed to sell the mine to Coronado Coal Group for $700 million under an agreement which also includes a value share mechanism linked to future metallurgical coal prices.

Should the transaction complete successfully, management estimates that it will generate a post-tax profit of approximately $100 million.

Furthermore, for the next two years the company will receive 25% of Curragh’s export coal revenue generated above a realised metallurgical coal price of US$145 per tonne.

The sale is subject to a number of conditions including approval from the Foreign Investment Review Board.

Managing director Rob Scott has stated that the sale is part of the company’s plan to evaluate all strategic options for its Resources division with a view to maximising shareholder value.

No decision has been made on the future of Wesfarmers’ 40% interest in the Bengalla coal mine at this point. Though I suspect it is only a matter of time until this is offloaded as well, allowing the company to focus on its core business.

What now?

I think this was a good decision by the company and expect the market to respond positively to the news.

However, it isn’t yet enough for me to invest. Although its sales growth has been reasonably positive in the first-quarter, I’m still a touch concerned about the margins that both Wesfarmers and rival Woolworths Group Ltd (ASX: WOW) are operating with at the moment.

As a result, I would suggest investors hold off an investment until after its half-year results are announced early next year when all will be revealed.

Instead of Wesfarmers I would suggest investors consider this top dividend share.

OUR #1 dividend pick to grow your wealth over the new financial year is revealed for FREE here!

Financial year 2018 is here and The Motley Fool’s dividend detective Andrew Page has revealed his must buy dividend share to grow your wealth in 2018.

You might not know this market leader, but it’s making waves in Asia and already boasts a term-deposit-crushing dividend above 4%. A debt free balance sheet and dominant market position at home and abroad mean this company offers investors income and some real-deal growth potential...

Simply click here to grab your FREE copy of this up-to-the-minute research report on this rising star right now.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Wesfarmers Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

The 5 mining stocks we’re recommending in 2019…

For decades, Australian mining companies have minted money for individual investors like you and me. But if you believe the pundits and talking heads on TV, those days are long gone. Finito! Behind us forever…

We say nothing could be further from the truth. To earn the really massive returns, you’ve got to fish where others aren’t fishing—and the mining sector could be primed for a resurgence. That’s why top Motley Fool analysts just revealed their exciting new research on 5 ASX miners they believe could help you profit in 2019 and beyond…

Including:

The best way we see to play the global zinc shortage… Our #1 favourite large-cap miner (hint: it’s not BHP)… one early-stage gold miner we think could hit the motherlode… Plus two more surprising companies you probably haven’t heard of yet!

For free access to our brand-new research, simply click here or the link below. But be warned, this research is available free for a limited time only, and we reserve the right to withdraw it at any time.

Click here for your FREE report!