Stanmore Resources (ASX:SMR) has sought to secure the remaining 50% interest in the Eagle Downs Metallurgical Coal Project, as well as 100% of the Eagle Downs South tenements in Queensland.
Stanmore, which has a $2.74 billion market capitalisation, has entered into definitive binding agreements with Aquila Coal and Aquila Exploration — both wholly owned subsidiaries of China Baowu Steel Group Corporation — to acquire the assets.
Grant Samuel, Palaris Australia, and McCullough Robertson Lawyers have been retained as advisers to the transaction.
Completion of the transaction is expected during H2 2024 following the satisfaction of certain conditions, including foreign investment review board approval, Chinese regulatory approval, and other third party consents.
“In acquiring 100% of the Eagle Downs assets Stanmore has full control over the development plan and is able to streamline management and fully leverage its strong technical capabilities, as well as unique infrastructure and logistics portfolio to unlock the value of the asset to its full extent,” Stanmore CEO and Executive Director Marcelo Matos says.
“Stanmore will seek to optimise the development plan and take a capital efficient approach to any future development decision.”
On 12 February 2024, Stanmore acquired the initial 50% interest in Eagle Downs and 100% of Eagle Downs Coal Management after entering into agreements with a wholly owned subsidiary of South32 (ASX:S32), as reported by Mining.com.au.
At the time, Stanmore was in discussions with Aquila to acquire part of its interest in Eagle Downs and Eagle Downs South.
Completion of the South32 transaction is slated to occur this quarter (Q2 2024).
Consistent with the South32 deal, consideration for the Eagle Downs interest comprises an upfront payment of US$15 million, together with contingent payments linked to first longwall coal mining of 100,000 tonnes — some US$20 million — and a capped royalty of up to US$150 million, based on coal index price thresholds.
Unlike the South32 deal, however, Stanmore is not required to assume any additional royalties to third parties.
For Eagle Downs South, Stanmore will provide Aquila with an upfront payment of US$2 million and an additional US$10 million upon first 100,000 tonnes of coal being mined from longwall mining methods.
Stanmore will fund the upfront considerations for both assets with existing liquidity. As of 31 December 2023, the company had US$446.3 million in cash at hand, according to its latest quarterly report.
Stanmore Resources owns and operates the Isaac Plains Complex, South Walker Creek, and Poitrel metallurgical coal mines, as well as the undeveloped Wards Well, Isaac Plains underground, and Isaac Plains South projects in Queensland.
Write to Adam Drought at Mining.com.au
Images: Stanmore Resources
