JSW Steel to Acquire Major Stake in M Res NSW for Strategic Coal Integration

On August 12, 2024, JSW Steel Limited announced a significant strategic move in the global mining sector. The company’s Board of Directors approved the acquisition of up to 66.67% economic interest in M Res NSW HCC Pty Ltd (M Res NSW) through its wholly owned subsidiary, JSW Steel (Netherlands) B.V.

This investment involves an initial infusion of US$ 120 million, with a further commitment of US$ 50 million to cover deferred consideration payable in 2030.

M Res NSW, owned by Matthew Latimore of M Resources Pty Ltd, a prominent international mining, investment, and trading firm headquartered in Australia, holds a 30% stake in Golden M NSW Pty Ltd (Golden M).

Golden M is set to be the ultimate owner of Illawarra Coal Holdings Pty Ltd (Illawarra Metallurgical Coal), which manages the Appin and Dendrobium coking coal mines in New South Wales, Australia. These mines are notable for their substantial reserves, totalling approximately 99 million tons of prime hard coking coal, and have averaged production of around 6.5 million tons per annum over the past five years.

The acquisition’s primary objective is to achieve backward integration by securing a stake in a key coking coal asset. This strategic move aligns with JSW Steel’s broader goal of enhancing its supply chain and securing high-quality raw materials for its steel production. By gaining control over a significant portion of the coal reserves, JSW Steel aims to ensure a stable and reliable source of coking coal, which is critical for its steel-making processes.

The transaction will see JSW Steel acquiring 66.67% of the economic interest in M Res NSW via non-voting Class B shares, reflecting the company’s strategic interest without influencing operational control. The deal involves the execution of several Transaction Agreements, including a Shareholders’ Deed (SHA) and a Share Subscription Deed (SSA). The closing of this transaction is contingent upon fulfilling customary conditions precedent outlined in these agreements.

Completion of this transaction is expected by September 2024, marking a significant milestone in JSW Steel’s expansion strategy. The acquisition not only reinforces JSW Steel’s position in the global steel market but also demonstrates its commitment to securing essential resources for future growth and sustainability.

On August 13, 2024, the share price of JSW Steel opened at ₹925.00, touching the day’s high at ₹927.50, as of 10:58 AM on the NSE.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.