NEW coal projects are edging closer to operation amid industry claims that the coal price has bottomed out.
The $1.7 billion Eagle Downs coal project, an equal joint venture between Vale Australia Holdings and Aquila Resources, is a drivingforce behind the sector’s revived optimism; the 48-year project is expected to initially peak at a production rate of 5.9 million tonnes per annum and average at 4.5mtpa.
The mine’s product has been assessed as “low volatile, standard-grade hard coking coal and the brand is expected to be well received in global metallurgical coal markets”, according to Aquila Resources.
The joint venture, Bowen Central Coal (BCC), is constructing an underground longwall mine 25km southeast of Moranbah and 2km east of BHP Mitsubishi Alliance’s Peak Downs open cut mine, in Central Queensland’s Bowen Basin.
This year, joint venture partner Aquila Resources was taken over by Chinese powerhouse Baosteel and Australian freight company Aurizon in a $1.4 billion deal. Eagle Downs was one of two major assets for Aquila Resources and was valued at between $400 million and $500 million by
Grant Samuel.
Before the takeover offer was announced, Aquila Resources was “well advanced in a process intended to realise value from Eagle Downs through a reduction of the Aquila Group’s equity interest in the project”, the company stated.
“The announcement of the offer has effectively put this process on hold,” the company said before the offer was approved. Aquila Resources has not offered an update since the takeover but previously said if the offer was successful there would be a reduction in the company’s capital commitments. Eagle Downs involves the recovery of coal from the Harrow Creek Upper, Harrow Creek Lower and Dysart coal seams and contains a JORC resource of 959 million tonnes, comprising 648mt of measured resources an 171mt of indicated resources, as well as 254mt of JORC reserves.
The mine has been in the pipeline since 2008 when the first conceptual feasibility study was completed, and has accelerated since then. Each year has brought the project a new set of milestones, with environmental impact statement approval in 2010 and mining lease and mine development approval granted a year later.
The joint venture is looking to deliver first development coal next year with project completion in 2017, for a total funding requirement of $1.6 billion. Once Eagle Downs is at full capacity, coal will be transported to an on-site 1100 tonne per hour coal handling and preparation plant (CHPP) and then to port via the Norwich Park Branch railway.
For the short term, Aquila Resources proposed to transport its share of the coal to the Port of Gladstone. The ramp-up of coal supply will result in spare capacity at the terminal until 2018 and the company was looking into a longer term acquisition for port capacity at the Dalrymple Bay coal terminal.
However, Aquila Resources has no existing off-take commitments for Eagle Downs. Construction and expansion Eagle Downs has made significant progress in the past two years since receiving key approvals.
On-site construction began with a 6km sealed road, mine offices, site civil works, the site power substation and the initial gas drainage system, and late last year the box cut and two portal arches were finished. Before awarding a drifts construction contract to WDS, the joint venture also completed the mine portal area, site roads and the raw water dam.
A two-year contract was awarded to WDS that involved driving two 2km drifts from the surface of the Harrow Creek Upper coal seam to provide the workforce with materials access and permanent services for
the development of the mine. Work began on this at the start of this year and is expected to be complete by the end of 2015.
