Australian coking coal producers frustrated by limited approvals for new mines are queuing up for BHP Group Ltd.'s unwanted Australian coking coal assets. Yancoal Australia Ltd. is the latest to throw its hat in the ring but said it would not be drawn into a bidding war.

BHP is seeking buyers for its two Queensland metallurgical coal mines, Blackwater and Daunia, as part of an effort to "further focus on the highest-quality metallurgical coal for steelmaking," CEO Mike Henry told reporters Feb. 21.

The two mines BHP plans to off-load would be a good fit for Yancoal Australia, CEO David Moult told a March 1 call on the company's 2022 calendar-year results.

"Yes, we are interested in met coal mines, and, yes, we would be interested in the BHP mines; [but] we don't want to get into a bidding war," Moult said.

"It's not in our nature to overpay for assets," he added. "So we will be very controlled and sensible in our approach to it, but we certainly will be looking at those assets and we think they would be a good addition to our portfolio of mines and balance our thermal-met coal balance."

Moult also revealed Yancoal Australia has had "positive discussions" with Australia's Foreign Investment Review Board, or FIRB, about potential acquisitions. China's Yankuang Energy Group Co. Ltd. holds a 62.25% stake in the company.

"I think with the improving geopolitical position between China and Australia, we don't see any major issues going forward this year," Moult said.

News emerged this week that the FIRB recommended Australia's government block a Chinese investor from doubling its stake in Australian rare earths producer Northern Minerals Ltd..

Interest 'at the right price'

Coronado Global Resources Inc., Peabody Energy Corp. and Arch Resources Inc. would also likely be interested in BHP's assets, Eastern Value Ltd. Managing Director Jon Ogden commented in Yancoal Australia's call.

Coronado would be interested in the BHP divestment "at the right price," a spokesperson confirmed to S&P Global Commodity Insights. "The Blackwater mine in particular has opportunistic synergies with our Curragh Complex that could potentially unlock value for our company and shareholders."

Coronado CEO Garold Spindler had told a Feb. 22 analyst call that the company would "take a look at the details of the projects, pick those that suit us best and fit us best, and proceed from there." Also in the call, Goldman Sachs mining analyst Paul Young commented that Coronado has "the most synergies to capture, particularly between Curragh and Blackwater."

While Coronado has also expressed interest in Teck Resources Ltd.'s steelmaking coal spinoffs in Canada, Yancoal Australia's Moult said "Australia will always be our first choice of locality for any assets, be it coal or any other product."

Peabody declined to comment for this story, and Arch did not respond by the time of publishing.

Slow approvals, soaring demand

Strong demand for both thermal and coking coal, weather disruptions, supply chain issues and slow permitting contributed to Yancoal Australia's overall realized coal price increasing 168% to A$378 per tonne in 2022, from A$141/t in 2021. Revenue rose 95% to A$10.5 billion, and EBITDA was A$7 billion — both record highs. This is despite full-year attributable saleable coal production falling 20% from 2021 to 29.4 million tonnes.

"It's worth considering just how difficult it has been to get new mine approvals and funding for those new mines in recent years," Moult said. "Coal prices would not have reached the levels we've seen in 2022 if new supply had been incentivized.

"Metallurgical indices were on the rise again in early 2023, as auto manufacturing lifts the demand for steel — a factor that could positively impact met coal prices through much of 2023," Moult said.

Coronado's group CFO, Gerhard Ziems, had earlier told analysts that global seaborne demand for coking coal is expected to increase by 43% by 2050, driven by India's planned blast furnace steel production.

"It is difficult to see how the demand growth will be met by supply growth, given the limited approvals for new mines in the high-quality met coal regions of Australia and North America," Ziems said.

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