South32 has signed a conditional agreement with a subsidiary of China BaoWu Steel Group (BaoWu) to acquire a 50% interest in, and assume operatorship of, the Eagle Downs metallurgical coal project in Queensland’s Bowen Basin. The other 50% interest in the project will continue to be held by Aquila Resources – a subsidiary of BaoWu.

The consideration payable by South32 comprises an upfront payment of approximately US$106 million upon completion of the Acquisition 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.

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 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.

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.

Source: www.south32.net

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