Australia's South32 agrees to buy 50% stake in Eagle Downs met coal project
Staff Writer |
South32 announced that it had signed a conditional agreement with a subsidiary of China BaoWu Steel Grou to acquire a 50% interest in, and assume operatorship of, the Eagle Downs metallurgical coal project in Queensland’s Bowen Basin.
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The other 50% interest in the project will continue to be held by Aquila Resources (Aquila), a subsidiary of BaoWu.
The consideration payable by South32 comprises an upfront payment of approximately $106M upon completion of the acquisition (excluding transaction costs) and a deferred payment of $27M due three years after completion.
A coal price linked production royalty will also be payable and is capped at $80M.
The acquisition, which will be funded from the group’s cash reserves, is subject to conditions precedent and is expected to close in the first half of FY19.
Eagle Downs is a large, high quality and fully permitted metallurgical coal development project located approximately 25km south-east of the town of Moranbah and immediately adjacent to and down dip of BHP Billiton Mitsubishi Alliance’s Peak Downs mine.
The project was placed under care and maintenance in late 2015 having benefitted from initial investment that delivered site infrastructure including water supply and high voltage systems, office buildings and water and sediment dams.
Dual 2km drifts are also approximately 40% complete. Aquila has previously reported on its website a Coal Resource (100% basis) of 1,122Mt of which 67% (750Mt) is Measured, 12% (139Mt) is Indicated and 21% (233Mt) is Inferred in accordance with the JORC Code (2012 Edition).
Prior work undertaken by Aquila has indicated that Eagle Downs has the potential to export 4.5Mtpa of coal (on average) from one longwall over the first 10 years of full production.
Following completion of the acquisition and assumption of operatorship, South32 propose to commence a final feasibility study which will seek to optimise the mine’s design and development.
Subject to the findings of that study and requisite approvals, South32 in partnership with Aquila plan to construct a multi-seam underground longwall metallurgical coal mine and processing plant with a dedicated rail spur and train loadout facility. ■