The access drifts at the Eagle Downs project are 40% complete. (Photo: Aquila Coal)
Stanmore Buys South32’s Stake in Peak Downs
“The acquisition of Eagle Downs is consistent with Stanmore’s ambition to expand its footprint in Queensland’s premium metallurgical coal basin,” said Marcelo Matos, CEO and executive director, Stanmore Resources. “Eagle Downs is a high-quality project underpinned by a substantial resource base, which provides an exciting development opportunity that is complementary to our broader portfolio and in close proximity to our existing operations. We believe we can bring our strong technical capabilities, as well as unique infrastructure and logistics portfolio, which will enable Stanmore to unlock the full value potential of Eagle Downs and provide a capital- efficient pathway for any future development decision.”
The Eagle Downs project was placed on care and maintenance in 2015. It would be an underground coal mining project with enough reserves to support longwall mining for 40 years. The current mine infrastructure includes underground access drifts (40% complete). It has access to a rail haulage, water, and high-voltage power systems. The mine would be within a reasonable trucking distance to the Stanmore’s Poitrel and/or Issac Plains coalhandling and preparation plants.
The transaction consists of $15 million upon completion (upfront consideration), $20 million payable upon the first 100,000 metric tons (mt) of coal being mined from longwall mining methods (deferred consideration) and a capped royalty of $100 million based on certain coal pricing thresholds. Stanmore would also assume the potential contingent royalty payments to Vale Australia for 50% of all future coal sales, which is capped at $80 million and also subject to minimum price thresholds. The transaction follows an extensive due diligence process undertaken by Stanmore along with external legal and technical advisers.
Eagle Downs is immediately adjacent to and down dip of BHP Mitsubishi Alliance’s Peak Downs mine. It is one of the last remaining undeveloped areas targeting the Moranbah Measures in the Bowen Basin. Production from Eagle Downs is expected to average 5.2 million metric tons per year (mt/y) from the initial Harrow Creek Upper seam, at an operating cost of $71/ mt (FOB ex-royalties), placing the mine in the lowest cost quartile of seaborne metallurgical coal supply. It is a fully permitted development project that is expected to produce a high-quality, low-volatile hard coking coal product.