The Perth-based miner said Thursday it would snap up the underground coking coal mine in New South Wales and its associated 16.67 per cent interest in the Port Kembla Coal Terminal from US miner Peabody Energy, which filed for bankruptcy in April.
The deal represents South32's first acquisitive move and appeared to sit well with analysts, which have kept a close watch on how the miner planned to use its growing cash pile, which hit $US551 million at the end of September.
Metropolitan, which has the capacity to produce about 2.3 million tonnes of coal a year, is about 30 kilometres from South32's Illawarra operation and sits immediately adjacent to a 71 million tonne undeveloped coal resource held by South32, presenting opportunities for expansion and product blending.
Chief financial officer Brendan Harris said because of those opportunities, South32 believed it was the natural owner of the asset and, combined with the company's "attractive" view of the coking coal sector, it would prove a value accretive bolt-on for South32 shareholders.
Prices for coking coal have trebled this year to more than $US250 a tonne following a tightening of Chinese supply, providing support for a number of deals in the Australian coal sector and enticing some producers to consider restarting mothballed mines.
Mr Harris said South32 viewed Australian coking coal as a "good place to be" with demand expected to remain robust and support a long-run price which would remain healthy albeit "substantially below where we are today".
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