Anglo American Faces Months-Long Shutdown at Major Coking Coal Project
Anglo American Plc‘s (LON: AAL) Grosvenor underground mine in Queensland, Australia, has been halted due to a methane explosion and subsequent fire. The incident occurred on Saturday, with no reported injuries. This setback has significant implications for the company’s operations and strategic plans.
Grosvenor, Anglo American’s largest metallurgical coal project in Australia, accounts for approximately 30% of the company’s annual coking coal production in Queensland. The fire is expected to take several months to extinguish, delaying production and potentially impacting the company’s planned asset sale.
The incident comes at a crucial time for Anglo American. Following its rejection of a $49 billion takeover bid from BHP Group (ASX: BHP), CEO Duncan Wanblad announced a major restructuring plan, which includes divesting its coal assets. The Grosvenor mine fire may complicate this process, potentially extending the timeline for the sale and affecting the valuation of the assets.
Related: Anglo American To Focus On Copper, Divest De Beers, Steelmaking Coal, Among Other Segments
Industry analysts suggest that the fire could lead to a lower bidding price for Grosvenor and the nearby Moranbah North coal project. Prior to the incident, these two mines were estimated to be worth around $3 billion.
This is not the first time Grosvenor has faced operational challenges. The mine, which began production in 2016, was closed in mid-2020 following an explosion that seriously injured five workers. It only resumed operations in February 2022.
Despite the setback, Anglo American is reportedly considering various options to proceed with the sale of its coal business. These options may include selling individual assets or excluding the Grosvenor mine from a potential deal. The company is keen to demonstrate progress on its restructuring plans, particularly as the regulatory standstill preventing a fresh approach from BHP is set to expire later this year.
Meanwhile, futures of Australian coking coal traded on the Singapore Exchange (SGX) jumped following the news, bringing the price from its recent low back up to $261.00.
Information for this story was found via Bloomberg, and the sources and companies mentioned. The author has no securities or affiliations related to the organizations discussed. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
