All images: Stanmore Coal.
BY ELIZABETH FABRI
THREE years; that’s all it took for Stanmore Coal to turn the two-year Isaac Plains mine into a 15-year mega project. Through strategic (and timely) acquisitions, Stanmore Coal now has a strong footprint in the Bowen Basin, and healthy cash flow as coal prices remain strong.
Stanmore Coal’s purchase of the shuttered Isaac Plains mine several years ago was a watershed moment for the then-explorer.
In 2015, the coal market was in the depths of a downturn. Prices were so bad many companies were looking for an out, but Stanmore Coal had other plans.
In July 2015, the company entered a deal to pick up Peabody subsidiary Millennium Coal’s undeveloped Wotonga (Isaac Plains East) project for $7 million.
Weeks later it struck the landmark deal with Vale SA and Sumitomo Corp to acquire the nearby Isaac Plains mine and infrastructure for a nominal $1; a giveaway really, given the mine had an estimated $630 million value four years earlier.
However, as part of the sale, Stanmore became responsible for mine rehabilitation and took over a number of contractual commitments.
Assets acquired included a coal handling and preparation plant; dedicated train load out and rail spur facilities connecting to the Goonyella rail system; Bucyrus 1370W dragline; workshops; and assorted critical spares and workshop goods.
By February 2016 Stanmore had restarted mining, with first production in April and first shipment in May that year.
But with an estimated two year mine life, the clock was ticking for the company to bring other production sources online, namely Isaac Plains East.
Unlike Isaac Plains, Isaac Plains East still needed to obtain Environmental and Mining Lease approvals.
Good news rolled in during the March quarter when the QLD Government granted Stanmore environmental approval, and four new mining leases for the project, adding seven years to the mine life, 210 local jobs, and an estimated $75 million in State royalties.
“The reopening of Isaac Plains was welcome news for Moranbah nearly two years ago, and this is another confidence-booster for the Moranbah community and the Bowen Basin mining community more broadly,” QLD Mines minister Dr Anthony Lynham said at the time.
“At peak production from the newly approved open cut mining operations, Isaac Plains East can produce 1.6 million tonnes of metallurgical coal annually.”
The new leases, coupled with Stanmore’s future plans for Isaac Plains Underground, would also help it edge closer to its goal of producing 2.7 tonnes of coal per annum.
Acquiring Wotonga South
Then, in June another strategic acquisition was announced; the purchase of Millennium Coal’s Wotonga South coking coal deposit.
Under the deal, Stanmore would acquire the MDL137 and EPC728 tenements for $30 million cash, plus a production-based royalty capped at $10 million if the premium coking coal price reached more than $170 per tonne.
The tenements are next to Isaac Plains and comprise about 15-20 million tonnes of coal; enough to extend the life of the Isaac Plains Complex by eight to 10 years.
“Wotonga South (which we have renamed Isaac Downs) meets the investment criteria in our strategic plan,” Stanmore Coal managing director Dan Clifford said.
“When Stanmore acquired Isaac Plains, the life of mine was only two years; Isaac Plains East and Isaac Downs will extend it beyond 15 years.”
Mr Clifford said Stanmore had its eye on Isaac Downs for some time and this was the next logical extension of the Isaac Plains Complex.
“After we set our investment criteria [for the Isaac Plains Complex], Stanmore had numerous opportunities, both internal and external, and Isaac Downs was one of them,” he said.
“With the company generating cash and about to improve cash flow with Isaac Plains East, we are well positioned, and the timing couldn’t have been better.
“Stanmore has a clear strategy that leverages our existing infrastructure to generate significant value because minimal capital is required to expand our production profile and mine lives.”
The purchase now awaits FIRB approval and the completion of other customary conditions.
In FY19 Stanmore said it expects to produce 2.3 million tonnes of coal; a 40 per cent increase from FY18 results.
In the coming months, mining will be conducted at Isaac Plains and Isaac Plains East concurrently.
This means mining at Isaac Plains East will initially involve just a truck and shovel fleet, which will transition to the dragline once Isaac Plains mining ceases later this year.
In July, lead contractor Golding Contractors began operations at the new satellite pit, with production to follow in August.
Meanwhile, Stanmore was also advancing a Bankable Feasibility Study for its Isaac Plains Underground mine, with a final investment decision expected during FY19.
And all going well, the Isaac Downs mine will advance soon also.
Mr Clifford said the miner’s experience obtaining permits to develop Isaac Plains East “will be invaluable in fast tracking approvals for Isaac Downs”.
“As soon as the transaction is completed, we will finalise mine planning and commence environmental assessment to allow development as soon as practicable,” he said.
“This allows us to optimise our production profile by focusing on the highest margin coal source first, and subject to the outcomes from Isaac Plains Underground or any other source of ROM coal, puts us in a strong position to fill our CHPP.”
Mr Clifford said beyond Isaac Plains the company “will continue to look at other regional opportunities that fit our investment criteria.”
“Isaac Plains gives us the right platform at the right time in the cycle,” he said.
“With the short and long-term strength in the coal market, Stanmore will continue to assess and evaluate development opportunities for our quality pre-production assets across both metallurgical and ‘HELE’ thermal sources.”