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Whitehaven Coal halts trading to secure financing for BHP Mitsubishi Alliance mines

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2023-10-18

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Whitehaven Coal (ASX:WHC) has halted trading in its shares until Friday as it finalises a substantial finance package to purchase BHP Mitsubishi Alliance's Daunia and Blackwater export coking coal mines in Queensland. In an early morning statement on Wednesday, Whitehaven requested the trading halt, citing an impending announcement regarding its involvement in the sale of these metallurgical assets by BHP Mitsubishi Alliance. Simultaneously, BHP confirmed Whitehaven Coal as the preferred bidder for the divestment process in its September quarter operations report.

Whitehaven now faces the challenge of raising billions of dollars for the acquisition. As of June 30, Whitehaven had over $2.3 billion in cash on hand and a market value of $5.68 billion as of Tuesday night's close. This successful bid occurs amid pressure from London hedge fund Bell Rock, urging Whitehaven to refrain from purchasing the mines and instead return cash to shareholders.

Analysts suggest that Whitehaven has been in discussions with brokers and bankers to secure funding for the deal, which is expected to involve a significant equity placement and some debt to minimize dilution of existing shareholders. Market reports estimate the combined price for the two mines to be approximately $US3.5 billion or more than $A5.5 billion. If entirely funded with equity, this could result in substantial dilution of existing shareholders and potential rejection of the plan at a shareholder meeting.

The most likely approach for Whitehaven is to partner with major investors, although attracting superannuation funds interested in investing in two aging coking coal mines may prove challenging.

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