Japan’s Idemitsu Kosan has agreed to divest its 85% stake in the Ensham coal mine in Australia to Sungela, a majority-owned subsidiary of Thungela Resources, for an upfront payment of A$340m ($240m).

With the acquisition, South African firm Thungela intends to diversify away from its homeland, where mining operations have been affected due to long power cuts, reported Reuters.

As part of the agreement, Idemitsu Kosan will also receive a royalty payment from Sungela. This will be based on the coal price and volume to be sold from the Ensham coal mine in 2023 and 2024.

Thungela owns a 75% stake in Sungela while Mayfair Corporations Group and Audley Energy each hold 12.5% stakes.

Thungela said in a statement: “Under the transaction, Thungela will have operational control of Ensham coal mine and, subject to certain existing arrangements, envisages marketing its proportional share of the coal produced by Ensham coal mine.

“This will provide Thungela with access to the Japanese and other Asian markets where demand remains strong and also better balance the group’s price exposure by providing exposure to the strong Newcastle export coal price, complementing the group’s existing exposure to the Richards Bay benchmark coal price.”

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By GlobalData

The sale forms part of Idemitsu Kosan’s effort to gradually shift to cleaner fuels. As part of this plan, the firm also intends to close its Muswellbrook coal mine in Australia by the end of next month.

In a press statement, Idemitsu Kosan said: “The company aims to achieve sustainable profitable growth by transforming its business portfolio by reducing fossil fuel assets and maximising earnings from existing businesses, and by expanding new businesses that contribute to carbon neutral society.”

The Ensham operation includes one active open-cut coal mining pit and an underground mine. It has production levels of 5.3 million tonnes per annum.