South32 decided to scotch its proposed acquisition of a coal mine in the eastern Australian state of New South Wales from Peabody Energy rather than make concessions to domestic steelmakers to allay competition concerns.

The miner said it was not prepared to make “significant concessions” toward Australian steelmakers in order to get the deal over the line, meaning it still remains on the lookout for its first acquisition since being spun out of BHP Billiton in May 2015.

South32′s proposed acquisition came under scrutiny from the national competition watchdog, the Australian Competition and Consumer Commission, on concerns it could lessen competition in the supply of coking coal to Australian steelmakers given most of the country’s reserves are already controlled by industry giants such as BHP, Mitsui and Anglo American.

South32 said in a statement to the ASX that to make concessions in favour of Australian steelmakers, which would include the likes of Bluescope Steel (also a former BHP spin-off), “would be contrary to the global market in which metallurgical coal producers compete and would adversely affect the value proposition of the acquisition.”

Graham Kerr, South32′s chief executive, said:

To proceed with the acquisition in light of the anticipated concessions would have compromised the merits of the transaction and this is not something we are prepared to do.

The $200m deal would have seen South32 acquire the Metropolitan Colliery, located 45km from Sydney in the town of Helensburgh, and an associated 16.7 per cent stake in the Port Kembla Coal Terminal from Missouri-based Peabody. Port Kembla, a suburb of the seaside city of Wollongong – also known as ‘The Gong’ – is 93km from Sydney.

Glenn Kellow, Peabody President, said in a statement:

We are surprised that South32 and the ACCC reached an impasse, given both the physical synergies and the global nature of the metallurgical coal markets.

On the other hand, we see continuing opportunities given Metropolitan’s quality coking coals and port location, and our objective will be to operate the mine while maximizing returns in the international marketplace.

South32 shares were down 1.1 per cent, having trimmed early losses of as much as 2.5 per cent. The stock had been up as much as 0.4 per cent at one point. Bluescope Steel was up 0.2 per cent.

It was a solid performance for the company given the S&P/ASX 200 Resources index was down 2.2 per cent, double the decline of the benchmark S&P/ASX 200.

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