India's top steelmaker JSW Steel said on Monday it will buy a 67% stake in an Australian private firm for $120 million in a bid to expand its coal reserves.
JSW Steel said it will buy the stake in M Res NSW HCC, an affiliate of coal trading firm M Resources, which along with Singapore's Golden Energy had earlier this year bought South32's Illawarra metallurgical coal business for $1.65 billion.
After South32's sale of its coal business is completed, due in September, JSW Steel said it has proposed a contract with Illawarra to purchase hard coking coal in proportion to its indirect interest in Golden Energy and its units.
Having indirect equity ownership of these coking coal mines will help JSW Steel source coal at market-linked prices, said Kunal Kothari, research analyst at Centrum Broking.
"The deal will allow availability of coal for the company even in times of inconsistency and disruptions in coal supply."
With the deal, JSW Steel will hold stake in coal mines in the south of Australia with reserves of 99 million metric tonnes and capacity of 6.5 million tonnes per annum.
The company said it will buy the stake through its Netherlands-based unit, and will invest a further $50 million by 2023.
Raw material security and cost optimisation remain a key strategic priority for the company, and the deal is a step forward in achieving those objectives, JSW said in a statement.
