Shares in diversified miner South32 have tumbled to their lowest level in more than three months after Australia's competition watchdog expressed concern over its proposed deal to take over a a coking coal mine in NSW.
The global miner in November agreed to buy the Metropolitan Colliery in NSW from US coal giant Peabody for $US200 million ($A259.8 million), along with a 16.67 per cent stake in the Port Kembla coal terminal in Wollongong.
The Australian Competition and Consumer Commission on Thursday said the proposed acquisition could substantially lessen competition in coking coal supply to local steelmakers, with South32 set to become the largest supplier in the Illawarra region.
"Australian steelmakers currently appear to benefit from competition between South32 and Metropolitan in the form of lower prices and a wider product range. This transaction will remove that competitive rivalry," ACCC Chairman Rod Sims said.
South32 shares fell more than four per cent on the news and in afternoon trading remained down 3.7 per cent at $2.505.
"The ACCC's preliminary view is that coal suppliers outside the Illawarra region may not act as a strong competitive constraint on South32, largely due to the additional costs associated with transporting material volumes of coal from other regions," Mr Sims said.
South32 chief executive Graham Kerr said earlier this month the acquisition would be complementary to its coal operations in the region.
The deal is the first acquisition by the global miner since it was spun off from BHP Billiton and listed in 2015. The company said it will continue to engage with the ACCC on the review process.
The ACCC has invited submissions from interested parties and will announce its final decision on the deal on April 6.
