BHP Group agreed to sell two Australian coking coal operations to Whitehaven Coal for at least US$3.2 billion, as the world’s biggest miner extends its withdrawal from fossil fuels.

Whitehaven has been selected as the preferred bidder in the divestment process, BHP said in its quarterly production report released on Wednesday (Oct 18). The coal miner said in a separate statement it will pay US$3.2 billion for the assets, along with additional payments of up to US$900 million contingent on realised pricing exceeding agreed thresholds.

BHP co-owns the mines, which supply metallurgical coal to steelmakers in markets including China and India, in a 50:50 joint venture with Mitsubishi, and its stakes are worth about US$4.2 billion, according to Liberum Capital. The bidding process for the two mines drew competition from rivals including Indonesia-based mining contractor Bukit Makmur Mandiri Utama PT, Stanmore Resources and Peabody Energy.

Since 2021, BHP has announced sales of coal, oil and gas assets in locations including Australia, the US and Colombia under chief executive officer Mike Henry’s strategy to refocus the producer’s portfolio on materials tied to growth in renewable energy, electric vehicles and agriculture. The Melbourne-based company this year completed its biggest deal in more than a decade to add OZ Minerals and boost volumes of copper, a key transition metal.

Henry has also focused on shedding costlier mines and argues BHP should only retain its highest-quality metallurgical coal operations which can potentially help customers limit some emissions in the steelmaking process. Royalties on output imposed by Queensland’s government mean the coal mines are unlikely to win major investment in the future, he previously said.

BHP will be the No 3 supplier of the material after completing the sales and could seek to exit its stakes in remaining assets, Liberum Capital said in a Sep 20 note.

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The producer has no current plans to consider sales of other Queensland coking coal operations, chief development officer Johan van Jaarsveld said Oct 5 in Melbourne.

Shares of BHP rose as much as 0.9 per cent in Sydney on Wednesday, before trading 0.5 per cent higher at A$45.805 apiece as at 1.54 pm local time. Whitehaven’s shares were halted from trading early Wednesday.

The sale announcement comes as BHP said iron ore production from Western Australia fell 4 per cent in the three months to Sep 30 from the year-before period. Still, it reaffirmed its total output forecast of the steelmaking material for the full year that started Jul 1 at between 282 million tonnes to 294 million tonnes. It also said copper output rose 11 per cent in its first quarter, while metallurgical coal fell 16 per cent.

BHP and its closest rival Rio Tinto Group are among the top commodity exporters being closely watched for insight into the economic slowdown in China that’s causing ripple effects across the global economy. The biggest metals-consuming nation’s disappointing post-pandemic recovery and persistent property woes have put downward pressure on steel demand and iron ore prices this year. BLOOMBERG