By Ben Dummett and Rhiannon Hoyle
BHP Group Ltd. is nearing a deal to sell its controlling interest in two metallurgical coal mines to Australian coal miner Stanmore Resources Ltd. for about $1.25 billion, according to people familiar with the matter.
The deal could be announced in the coming days, assuming talks don't break down in the interim, the people said.
BHP is selling its 80% stake in BHP Mitsui Coal, or BMC, which operates the South Walker Creek and the Poitrel coal mines in Queensland, a coal-rich Australian state located in the northeastern part of the country. Japan's Mitsui and Co. owns the remaining stake.
The mines produce metallurgical coal, a key ingredient in the manufacturing of steel. BHP put the mines up for sale more than a year ago to shed lower-quality mines.
BHP, the world's largest mining company by market value, is projecting that steelmakers will want increasingly high quality coal as they seek to lower their carbon emissions. "That is going to require higher-quality hard coking coal, and it is why we believe there is this great business in the higher-quality hard coking coals that BHP has," Chief Executive Mike Henry said recently.
BHP remains Australia's largest producer and exporter of metallurgical coal as an equal partner in a separate alliance with Mitsubishi Corp. That joint venture operates seven mines and owns and operates the Hay Point Coal Terminal in Australia, one of the world's largest coal-export ports.
Negotiations to sell the BMC operations have occurred against a backdrop of surging coal prices. The price paid for Australian hard coking coal exports rose to a record high in September, according to S&P Global Platts, which has been assessing prices for that type of coal since 2013.
The commodity's price, which has plateaued in record territory, has more than tripled this year because of a global supply shortage.
Stanmore, which is majority owned by Singapore-listed Golden Energy and Resources Ltd., has been active in deals for coal mines in recent months. In July, one of its joint ventures bought two mines from Peabody Energy Corp.
Write to Ben Dummett at ben.dummett@wsj.com and Rhiannon Hoyle at rhiannon.hoyle@wsj.com