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Monsters of Rock: Stanmore buys Chinese steel giant out of Aussie coal, another miner goes bankrupt
Mining
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- Stanmore has doubled up its stake in the Eagle Downs coal project in Queensland, with Chinese steelmaker Baowu bowing out
- Gold miners deliver good and bad news in pre-quarter production reports
- Galena goes bust, Aurelia hits high grade zinc, and Materials sink on Friday
Aggressive coal acquirer Stanmore (ASX:SMR), backed by Indonesia’s Widjaja dynasty, has bought the world’s biggest steelmaker out of its coking coal ambitions in the hope of developing a long dormant met coal mine.
The deal to acquire Baowu’s 50% stake in Eagle Downs comes after SMR mopped up coal divester South32’s (ASX:S32) 50% share on identical terms of US$15m upfront, US$20m once the first 100,000t of coal is mined and US$150m linked to price index thresholds.
SMR will also pick up exploration ground at Eagle Downs South for $2m (Aussie) plus $10m if 100,000t of coal is mined from the lease.
Baowu has spent big in Australia to gain access to raw materials for its steel plants in China, partnering with Rio Tinto (ASX:RIO) in its new 25Mtpa Western Range JV and MinRes (ASX:MIN) on its 35Mtpa Onslow Iron hub in the Pilbara.
Baowu and Aussie coal hauler Aurizon (ASX:AZJ) spent $1.4 billion to acquire Tony Poli’s Aquila Resources in 2014.
Steel and raw materials markets tanked straight after, with iron ore prices dropping as low as US$38/t in late 2015. Maybe the Chinese aren’t as smart and all powerful in this caper as we thought.
The APIJV only came back to life as Onslow Iron amid an iron ore price surge in 2021 after MinRes stepped in to take charge, Chris Ellison’s firm having briefly tried and abandoned a plot to intersect Baowu’s Aquila bid back in 2014.
As for Eagle Downs, the consolidation of the project elevates it to the next major development in SMR’s pipeline.
A one time tiddler, SMR leveraged a short-lived boom in coal prices to move into the mid-tier with the help of a shock billion dollar plus deal for BHP’s unwanted stake in its coal JV with Mitsui.
The Poitral and South Walker Creek acquisitions have seen SMR lift its output more than four times over, paying off much of the purchase in its first year as PCI coal prices boomed following Russia’s invasion of Ukraine.
South32 (ASX:S32) also announced the sale of its Illawarra coal operations to the Stanmore adjacent Golden Energy and Resources (a formerly Singapore listed company held by the Widjajas) and M Resources – run by Stanmore backer and coal trader Matt Latimore.
The AFR’s Street Talk reported today the clock is now ticking on BlueScope Steel’s (ASX:BSL) pre-emptive right to come in and claim the assets from under the nose of the buyers.
BlueScope owns the Port Kembla steelworks which were once married with the Illawarra coal mines in the portfolio of BHP.
Gold miners sell some candy
Gold miners have sold a bit of candy to shareholders, delivering their production numbers ahead of quarterly reporting season.
We say selling some candy because an uptick in production reported ahead of time can catch a bump before investors have to turn their minds to nasties like production costs, or companies can toss out some bad info early in the hope all the crap stuff’s out of the way and expected once the numbers are out.
The early drops have some good and bad in them.
On the plus side is perennial under-achiever St Barbara (ASX:SBM), which was up almost 8% before lunchtime after announcing a 33% jump in third quarter gold production from its Simberi mine in PNG to 17,257oz, with MD Andrew Strelein flagging further improvements with the project’s guidance weighted to the second half.
The company needs to produce around 19,500oz to hit its FY24 target of 60,000-70,000oz in the June quarter, having produced 40,604oz so far this financial year.
SBM sold 18,020oz at an average price of $3178/oz, with better cashflow and a tax refund in Canada boosting cash on hand from $214m to $218m.
Capricorn (ASX:CMM) shares meanwhile fell after more than 280mm of rain scuppered production at its Karlawinda mine.
Mark Clark’s gold darling boosted cash from $160.1m to $177.8m between December 31 and March 31, but has set up investors for a guidance disappointment, suggesting it will produce 112,000-115,000oz in FY24, missing guidance of 115,000-125,000oz.
After producing 86,116oz through the first nine months of FY24, it’s planning to deliver 26,000-29,000oz in the June quarter.
West African Resources (ASX:WAF) was up slightly after providing a no frills production update, producing 56,595oz at the Sanbrado mine in Burkina Faso and selling 49,509oz at an average price of US$2078/oz. It says it is tracking well to deliver calendar year guidance of 190,000-210,000oz at all in sustaining costs of US$1300/oz.
Gold reporters share prices today
Exploration results, administrations and a falling materials sector
A few quick hits:
Aurelia Metals (ASX:AMI) was up on some drill hits, one yet to be properly assayed that showed base metals mineralisation could continue to the north of its new Federation development and another with strong zinc grades showing the orebody continues to the east.
You can check out our raving (sorry roving) reporter Rob Badman’s visit to Aurelia’s New South Wales gold, copper and zinc assets … here.
Galena Mining (ASX:G1A) is kaputt, with wet weather the final nail in the coffin at its Abra lead and silver mine near Wiluna in WA.
A chronic underperformer, Abra will be taken over by adminstrators from KordaMentha and was described by one of those salvage men Richard Tucker as ‘a world class asset with a 13 year mine life’.
That’s funny, we were under the impression world class assets didn’t go broke.
They’ll operate the mine — 60% owned by Galena and 40% by a local subsidiary of Japan’s Toho Zinc — with the view to recapitalise the company or sell the mine, which we guess requires a strong sell job from the off.
The materials sector copped a hammering, down by more than 1% as iron ore and battery metals stocks fell.
The exception was Mt Gibson Iron (ASX:MGX), which rose on news it was on track to hit full year guidance of 3.8-4.2Mt at its Koolan Island mine. MGX stashed the cash, lifting its bank balance from $358m to $430m across the March quarter.
