AQUILA Resources has agreed to offtake contract sell its 50 per cent share in the Isaac Plains coal mine in the Bowen Basin to Ocean Coal Mining, a wholly-owned subsidiary of Japan’s Sumitomo Corporation, for $430 million.
The Japanese company, which operates in 65 countries, has also secured a 50 per cent interest in Aquila’s Queensland coal exploration tenements through a memorandum of understanding (MOU) joint venture agreement.
In a statement released by Aquila last month, executive chairman Tony Poli said the sale, through its wholly-owned subsidiary IP Coal, and the proposed exploration JV with Sumitomo generated the funds needed for the construction of its West Pilbara iron ore project. The Sumitomo sale is subject to Brazilian miner Vale, owner of the other half of the Isaac Plains assets, not exercising its 60-day pre-emptive right under the Isaac Plains Coal Jointoint Venture.
The sale is also subject to Sumitomo receiving approval from the Australian Foreign Investment Review Board and relevant indicative approvals under the Queensland Mineral Resources Act.
The MOU, which excludes the Washpool hard coking coal project and Talwood coal project, allows Sumitomo, through its wholly-owned subsidiary Sumisho Coal Australia, to acquire a 20 to 50 per cent interest in the tenements it wishes to explore. The proposed JV will be managed by Aquila with the aim of identifying and developing commercially-mineable coal resources. Mr Poli said the Sumitomo sale followed a number of approaches with respect to Aquila’s interest in Isaac Plains, with the Sumitomo offer ultimately providing the most compelling value proposition.
As part of the sale terms, the company will retain its 50 per cent economic interest in an insurance claim relating to property damage and business interruption during the wet season in the 2011 financial year. “Whilst the company continues to pursue a sale of [the] Washpool hard coking coal project, today’s announcements regarding transactions with Sumitomo provides the company with increased flexibility to consider a broader range of options for maximising the value of the project for shareholders,” Mr Poli said in the statement. The Isaac Plains coal mine has a production capacity of 2.8 million tonnes per annum and produces a mix of metallurgic and thermal coals. Sumitomo already holds direct investments in JVs that own and operate thermal and metallurgic coal mines in Queensland’s Bowen Basin. “Aquila is please to enter this MOU with a highly-regarded and well-aligned partner focussed on the development of coal projects in Queensland,” Mr Poli said. “Combining Sumitomo’s financial strength and experience in producing coal joint ventures with Aquila’s high-quality exploration portfolio and strong management team will allow the company to maximise the potential of its exploration portfolio.” Mr Poli said that in light of the current depressed state of the manganese market, the Aquila board had decided to terminate the sale process that had been under way for the Avontuur project area in the Northern Cape Province of South Africa, in which Aquila holds a 74 per cent stake
Meanwhile, Aquila has boosted iron ore resource at its Thabazimbi project in South Africa by 43 per cent, to 67.9mt grading 61.6 per cent iron. Aquila, which holds a 74 per cent interest in the project, increased the resource from 47.6mt, and 71.6 per cent is now in the measured and indicated categories
By Helena Bogle