SOUTH32 to acquire interest and ownership of Eagle Downs coal project

The other 50% interest in the project will continue to be held by Aquila Resources Pty Ltd (Aquila), a subsidiary of BaoWu. The consideration payable by South32 comprises an upfront payment of approximately US$106 million upon completion of the acquisition (excluding transaction costs) and a deferred payment of US$27 million due three years after completion. A coal price linked production royalty will also be payable and is capped at US$80 million. 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.

South32 Chief Executive Officer Graham Kerr said: “We have a long-standing relationship with BaoWu as a supplier of manganese ore and alloy. We are very pleased to be able to further strengthen this relationship by assuming operatorship of Eagle Downs.

This acquisition embeds an attractive development option within our growing operating footprint and puts our strong balance sheet to work in a disciplined manner. This high quality metallurgical coal project benefits from prior investment which has the potential to support its accelerated development and deliver significant value to both South32 and Aquila.”

Eagle Downs is a large, high quality and fully permitted metallurgical coal development project located approximately 25km southeast 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 2 km drifts are also approximately 40% complete.

Aquila has previously reported on its website a Coal Resource (100% basis) of 1122 million t of which 67% (750 million t) is measured, 12% (139 million t) is indicated and 21% (233 million t) 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 4.5 million tpy 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.

Read the article online at: https://www.worldcoal.com/mining/29052018/south32-to-acquire-interest-and-ownership-of-eagle-downs-coal-project/