The Swiss group sold the assets in equal portions to current Joint Venture partners Itochu and Sumitomo for A$555 million (US$370 million). The sale price was approximately US$85 million over the fair value allocation of the MIM coal business at the time of acquisition.
A sum of A$49 million (US$32.6 million) of the total purchase consideration will be deferred until Xstrata approves the full development of the Rolleston project. A decision is expected early next year.
Following the transaction, expected at year-end, Xstrata Coal will retain the majority interest and the management rights in each of the Joint Ventures, with a 55% interest in the Newlands, Collinsville, Abbot Point Joint Venture and Oaky Creek Coal Joint Ventures respectively and a 75% interest in the Rolleston, Wandoan, Red Rock and Pentland projects. New Joint Ventures will be established for the latter four projects.
Xstrata chief executive Mick Davis said the decision to sell resulted from of a focus on securing value rather than size or production growth.
"This transaction represents an opportunity for Xstrata to realise significant value, while maintaining an excellent balance of exposures, particularly between bulk traded and terminal market/LME commodities,” he said.
Xstrata reported a 32% drop in profits to US$76.8 million for the first half of 2003, and said the Australian assets of the former MIM Holdings were poor performers.
Weak US dollar against local currencies had the largest impact on earnings, reducing EBIT by US$163 million compared to the corresponding period.
"The first six months of 2003 presented extremely difficult operating conditions, caused by the weak US dollar and dull commodity prices. Nevertheless, it is precisely in a time of weak prices that the best deals can be achieved and a company must move forward,” Xstrata chief executive Mick Davis said.
“In the face of these pressures, the successful completion of the MIM acquisition, together with the ongoing realisation of meaningful efficiency gains across the Group, represent significant achievements."
With regards the MIM assets acquired in a US$2.1 million takeover completed late in June, Xstrata was particularly critical of MIM's coal division, saying it was clear that significant issues were not adequately addressed.
Xstrata said unit operating cash costs at the Oaky Creek underground mines increased 42% period-on-period, which, combined with lower sales volumes, saw earnings (EBIT) fall a whopping 78% from US$65.5 million to US$14.1 million.
The Collinsville operation also suffered difficulties - not addressed by "an effective management plan" - and Xstrata said a "comprehensive review has been undertaken to tackle the failures of the management systems inherited and to improve production performance and cost management across the operations".
Meantime development of the Rolleston open cut thermal coal operation moved a step closer with Xstrata committing to $3.9 million to a 50,000t sample pit to enable the securing of additional key customers. A decision is expected early next year.
