By Rhiannon Hoyle 

BHP Group Ltd. said it will sell its controlling interest in two metallurgical coal mines to Australian coal miner Stanmore Resources Ltd. for up to $1.35 billion.

BHP said Stanmore will buy 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 deal includes $1.1 billion cash on completion, $100 million in cash six months later and a possible up-to $150 million payout in the 2024 calendar year linked to prices. The agreement, excluding the potential price-linked payment, represents an enterprise value-to-Ebitda multiple of 6.9 times, BHP said.

BHP said profits from the deal could be used for future dividends, buybacks, or both. It expects to deal to be completed in the middle of the 2022 calendar year.

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 focus on higher quality coking coal it projects will be in high demand from steelmakers as they seek to cut their carbon emissions.

"As the world decarbonizes, BHP is sharpening its focus on producing higher quality metallurgical coal sought after by global steelmakers to help increase efficiency and lower emissions," said Edgar Basto, BHP's Australian minerals president.

BHP, the world's largest mining company by market value, 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.

Golden Energy has guaranteed Stanmore's obligations to pay the purchase price and any break fee obligations to BHP up to $600 million, BHP said.

BHP said a review process for its New South Wales Energy Coal business is ongoing and that it remains open to all options for the unit.

Write to Rhiannon Hoyle at rhiannon.hoyle@wsj.com