BHP (ASX:BHP) announces first deal in thermal coal selloff

The mining giant remains committed to its exit of thermal-coal operations.

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Commodities premium ASX shares Female miner and male miner stand in open mine pit surveying the area

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BHP Group Ltd (ASX: BHP) shares finished yesterday 1.04% in the green, after announcing the first step in the company’s thermal coal selloff. This morning, however, the BHP share price has given back yesterday’s gains and is currently trading down 1.36% at $47.74 per share.

Let’s take a closer look at the mining giant’s recent news.

BHP offloads stake in coal project

Yesterday afternoon, BHP announced the divestiture of its 33.3% stake in the Carrejon coal project

Carrejon is a non-operated energy coal joint venture in Colombia. In addition to BHP, Anglo American and Glencore each held a 33.3% position in Carrejon prior to this transaction. The transaction will occur on a $387 million cash sale to Glencore PLC.

BHP has previously stated it intends to divest its thermal-coal operations by the end of 2022.

The sale is anticipated for full closure by December 2021, and the purchase price may include an adjustment for dividends paid to BHP by Carrejon from when signing to the deal’s completion.

Glencore acquired Anglo American’s position on similar terms, in addition to BHP’s interests, for a total consideration of ~USD$588 million.

Further, an additional post-taxation impairment charge of $80 million will be recognised by BHP in the second half of FY21 related to the sale.

Analysts at investment bank Jeffries state the sale is a “win-win-win deal” for all parties involved.

“Glencore triples down in Columbia but will run the asset for cash until depletion,” it said in a note to investors on Monday.

Although BHP shares finished in the green, the share price fell around 5% intraday on announcement of the divestiture at about 2pm, and fell again towards the end of yesterday’s session.

The entire transaction is expected to settle sometime in FY22.

BHP share price snapshot

At the time of writing, the BHP share price is down 0.87% across the past month, but has returned more than 12% over the year to date.

With a share price of $47.74, BHP has a market capitalisation of around $140 billion, and trades at a price-to-earning ratio (P/E) of 24.97.

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