The board of JSW Steel approved the acquisition of up to a 66.67 percent economic interest in Australian mining company M Res NSW HCC Pty Ltd (M Res NSW) through an investment of $120 million. The investment will be made via the company's wholly-owned subsidiary, JSW Steel (Netherlands) B.V., the company said in a exchange filing on August 12.
The deal involves subscribing to non-voting Class B shares in M Res NSW. As part of the investment agreement, JSW Steel is also committed to investing an additional $50 million by 2030 to cover the company's deferred payment obligations.
The Australian company holds a 30 percent stake in Golden M NSW Pty Ltd (Golden M). Golden M is going to own Illawarra Coal Holdings Pty Ltd (Illawarra Metallurgical Coal), which runs the Appin and Dendrobium coking coal mines in New South Wales, Australia. These mines have about 99 million tons of high-quality coking coal, a key steelmaking ingredient.
JSW Steel has proposed to enter into a market-linked offtake contract with Illawarra Metallurgical Coal for purchase of hard coking coal in proportion to its indirect economic interest in Golden M and its subsidiaries, once the sale of the company is completed next month, the company said. Thus, the investment aligns with JSW Steel's strategy to secure high-quality raw materials and optimize its cost structure.
"A secure supply of this high-quality coking coal allows for superior blast furnace operations and provides JSW Steel with coal blending options. Given the limited visibility of additional capacity premium hard coking coal assets, this acquisition is an important step in securing raw material for JSW Steel," the company said in a separate statement.
Indian steel mills rely heavily on imports for coking coal, sourcing the majority of this essential material from Australia, Russia, and the United States. As a result, any disruptions in the supply chain can expose them to significant price increases and operational challenges.
In May, the steelmaker had announced acquisition of Mozambique-based mining company Minas de Revuboe (MDR), to benefit from MDR's 800 metric tonnes of premium hard coking coal reserves in Mozambique.
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