Wesfarmers has signed an agreement to sell its 40% stake in the Bengalla coal mine joint venture to partner New Hope for A$860m ($637.83m).

The company will continue to benefit from earnings and cash flow generated from its interest in Bengalla until the completion of the transaction.

“We believe this agreement with New Hope is in the best interests of our shareholders”

Apart from Wesfarmers’ 40% stake, New Hope owns a 40% stake in the Bengalla mine with 10% held by Taipower and 10% by Mitsui.The Bengalla mine currently supplies thermal coal to domestic and export markets from its open cut mining operation located southwest of Muswellbrook in Hunter Valley, New South Wales.

The mine can produce up to 15 million tonnes of coal per annum, which is used for power generation and is exported primarily to customers in Japan and North Asia.

Wesfarmers managing director Rob Scott noted that the deal follows the company’s Curragh coal mine acquisition by Coronado Coal in March this year.

Scott said: “We believe this agreement with New Hope is in the best interests of our shareholders and ensures a smooth transition in the ownership structure of the Bengalla joint venture.

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“Bengalla has made strong returns for Wesfarmers shareholders since our initial interest was acquired in 1991 and it is pleasing the extensive, disciplined and patient review of our coal businesses has resulted in outcomes which reflect the value of these world-class assets.”

Following the transaction, New Hope will own up to 80% stake in the Bengalla Joint Venture. The company will be finance the deal by a combination of cash and new debt facilities.

The transaction is subject to regulatory approval and pre-emption rights under the Bengalla Joint Venture Deed and is expected to close in the fourth quarter of 2018.