South32, the mining company spun out of BHP Billiton, said it would look at further acquisitions in coking coal, which is used to make steel, following its purchase of Australian assets from US coal miner Peabody this month.
Chief Executive Graham Kerr said coking coal “is attractive long-term not only because it will still be used in China but because of a lack of resources in India.”
Coking coal has risen more than 300 per cent this year after China cut the number of working days of its mines.
“We don’t think it’s going to stay where it is forever and we expect some weakness in the next calendar year,” Kerr said at the company’s annual general meeting in Perth.
Earlier this month South32 acquired the Metropolitan Colliery as well as a 16.67 per cent interest in the Port Kembla Coal Terminal in Australia for $200m from Peabody, which filed for bankruptcy in April.
Kerr said the diversified miner wouldn’t expand in thermal coal, however, which is used in power stations, due to uncertainty around climate change and a possible carbon price. The company is the third-largest exporter of thermal coal in South Africa.
“We’re not going to build and buy a new energy coal basin,” he said.
He also said the company would maintain its strong balance sheet. The company had a net cash position of £312m as of the end of June.
“We’ll continue to identify and evaluate new and exciting opportunities outside our current portfolio where we see value but we won’t compromise our balance sheet,” Kerr said.
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