Stanmore Coal scoops up Peabody Energy coking coal mine in Australia
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Australian coal shipper Stanmore Coal (ASX:SMR) has joined forces with an Australian coal trader to acquire Peabody Energy Australia’s currently idled Millennium and Mavis Downs mine in Queensland.
The US coal company will receive an upfront cash payment of $1.25m for the coal assets and a royalty on their coal sales capped at $1.25m for the asset transaction.
An additional royalty of $3.50 per tonne is payable for up to five years while Australian premium-grade hard coking coal prices trade above $US175 per tonne at Queensland’s ports.
They are currently trading around $US110 per tonne for May shipments. This type of coal is used to make steel.
Millennium and Mavis Downs are currently in a production halt after being placed in care and maintenance and lie adjacent to Stanmore Coal’s Isaac Plains complex in Queensland.
“Restarting the Millennium and Mavis Downs mine represents a low capital and quick to market investment opportunity in a high quality metallurgical coal asset, supported by access to existing critical infrastructure,” said Stanmore Coal.
The Millennium mine produces hard coking coal and pulverised injection coal or PCI, opening the door to blending opportunities with coal from Stanmore’s Queensland mines.
The two coal mines have a combined JORC reserve for coal of 2 million tonnes from open cut and auger, plus 5.4m tonnes from underground seams, and 37 million tonnes of resources.
“Mining is planned to recommence from July 2021, with planned production ramping up to 1 million tonnes per year, (subject to available rail and port capacity), with coal washing undertaken at the Red Mountain Infrastructure coal handling and preparation plant via a fully executed toll washing and train loading agreement,” said Stanmore Coal.
As part of the acquisition, Stanmore Coal’s joint venture will gain 500,000 tonnes per year of shipment capacity in Queensland’s coal exports railway and coal export terminals.
There is also a right of first refusal to an additional 500,000 tonnes per year of rail and port capacity for the joint venture.
Stanmore Coal’s partner in the joint venture for the Millennium and Mavis Downs assets is MetRes Proprietary Limited, an entity affiliated to Brisbane-based coal trader M Resources.
Stanmore Coal is providing its joint venture with a finance facility for up to $30m, including a working capital debt facility of $15m, and $15m for rehabilitation requirements.
The joint venture has undertaken to assume Peabody Energy Australia’s rehabilitation obligations for the Queensland mines is estimated at $25.7m, although the US miner will reimburse about half of this sum for rehabilitation costs incurred in a two-year period.
The ASX coal company will act as guarantor of the joint venture’s purchase obligations for the Millennium and Mavis Downs transaction.
M Mining, a wholly-owned subsidiary of M Resources, will be the manager and operator of the joint venture’s mining activities, and M Resources will exclusively market its coal.
Stanmore Coal is entitled to benefit from any synergies arising from its existing assets and the Millennium assets, such as infrastructure access, product blending and operational savings.
The ASX coal company sold 582,000 tonnes of mostly coking coal in the December quarter, up 17 per cent on the December 2019 quarter, and has access to around 2.4 million tonnes per year of rail and port capacity through the Dalrymple Bay coal terminal.
Iron ore company Macarthur Minerals (ASX:MIO) has started work on the mining and haulage aspects of a feasibility study for its Lake Giles iron ore project in WA’s Pilbara region.
Lake Giles has a hematite resource comprising 54.5 million tonnes of indicated resource at 47.2 per cent Fe, and inferred resources of 26 million tonnes at 45.4 per cent Fe.
“The scale of a billion-tonne magnetite resource in such close proximity to existing rail and port infrastructure is very unique globally,” chief executive Andrew Bruton said.
The company has engaged consultants for the mine and geotechnical design for its Moonshine and Moonshine North pits and for road haulage pricing.
“An extensive body of work is being undertaken on the mine design and geotechnical design and securing contractor pricing for mining and road haulage costs is important to ensure that mining operations can be optimised,” Bruton said.
The company is targeting initial production from its Lake Giles project of 3 million tonnes per year for magnetite concentrate.
Macarthur Minerals has submitted to mining contractors a request for pricing for the provision of mining and road haulage services including, drilling and blasting operations.
“The area of the pits stretch over six kilometres and we are only currently focused on the first 20 plus years of mine and plant life,” said Bruton.