Stanmore’s portfolio surges

Stanmore Resources (ASX: SMR) is building momentum on its path to growth with the acquisition of the outstanding 50%-stake in the Eagle Downs project in August of 2024.

The company has achieved this while ensuring constant production from its other Queensland operational assets, Isaac Plains, South Walker Creek and Poitrel.

Ongoing exploration is being undertaken to see the potential development of the Isaac South project, including the expansion of the project ground into the adjacent Moranbah South Project of Anglo American.

The Australian Mining Review speaks with Stanmore Resources chief executive Marcelo Matos to get the full picture of the company’s acquisition and growth strategy as we move into 2025.

AMR: What is motivating the surge of acquisitions this year, particularly the Eagle Downs and Isaac South acquisitions?

MM: Stanmore’s track record of mergers and acquisitions (M&A) in recent years has shown that we are always willing to look at opportunities that are aligned to our portfolio and strategy to grow and maintain our position as a leading metallurgical coal producer.

Through the development of the Isaac Plains Complex since 2015 and the transformational acquisition of BMC in 2022, Stanmore has not only established a strong base of high-quality operating assets but has solidified a unique infrastructure position that provides the potential to support our ambitious growth plans.

The low upfront-cost acquisitions of Eagle Downs and the Designated Area Agreement to support Isaac South (which we have since renamed to the Isaac Downs Extension) are complementary to this unique position and give Stanmore a competitive advantage in their potential development.

For Eagle Downs, the neighbouring processing and infrastructure capacity that could be available between the Isaac Plains Complex and Poitrel provide Stanmore with alternative pathways to development compared to previous owners.

This is notwithstanding the stand-alone quality of Eagle Downs, which if developed, will become a flagship underground project for Stanmore, adding capacity for high quality premium hard coking coals that are becoming increasingly scarce to end users.

Meanwhile, the Designated Area Agreement to support the Isaac Downs Extension was a transaction that only made sense for Stanmore, providing an economically viable development pathway whilst providing life-extension and infrastructure capacity utilisation for the Isaac Plains Complex overall.

How do these acquisitions support future growth and development?

MM: Both projects provide the potential for Stanmore to solidify its production profile for many years to come and maintain our position as a leading metallurgical coal producer.

The development of Eagle Downs could see incremental production of 4-6mtpa over a life of mine of 40+ years — which would significantly enhance the capacity and longevity of our overall portfolio and also be a long-term replacement for our Poitrel volumes given Poitrel’s shorter mine life around the mid-2030s.

Meanwhile, the Isaac Downs Extension, supported by the Designated Area Agreement at the neighbouring Moranbah South tenure could provide another 10-15 years of production at a similar scale to existing operations at Isaac Downs.

How is Stanmore balancing acquisitions with development of existing projects?

MM: Since Stanmore’s acquisition of BMC in 2022, there has been a surge in M&A activity for existing operating assets including the divestment of some or all the coal portfolios by major diversified miners, such as BMA’s sale of Daunia and Blackwater announced in 2023, and more recently Anglo American’s sale of their steel-making coal business in Australia in November 2024.

The value received by vendors has been increasing incrementally over this busy period, as a structural shift in long term metallurgical coal prices is expected due to tighter prospects for supply of metallurgical coal driven by the increasing challenges in the ramp-up of new projects, resulting in high demand and higher valuations of quality operating assets.

Stanmore has been seeking to balance this trade-off by transacting on development projects that make strategic sense and provide a logical and streamlined development pathway, but also actively looking for acquisitions of operating assets and portfolio adjustments that offer an attractive value proposition.

This is true for the Eagle Downs acquisition and the Designated Area Agreement for the Issac Downs Extension but has also been true for our divestment of the southern portion of Wards Well, which allowed Stanmore to realise significant value upfront whilst transferring the asset to a party for which it is strategically aligned.

How do these two strategies support each other?

MM: As development projects typically take a couple of years (or more where approvals are required) to achieve full scale production, these projects allow us the ability to time their commencement with the depletion and scaling back of our existing operating assets, meaning these assets can ensure Stanmore has a steady and sustainable level of production for many years to come.

Acquisitions of existing operating assets is the quickest and simplest way to achieve overnight growth in production, however that needs to be assessed based on the quality of those assets and the returns expected to be generated for our shareholders, while for development projects we also need to consider within the context of funding and approvals challenges to get development projects off the ground.

Stanmore is proactive in pursuing either strategy, ensuring that any transaction is strategically aligned and does not compromise our strong position currently provided by our existing operating base.

What major successes have you seen at Isaac Plains, South Walker Creek and Poitrel recently?

MM: There have been numerous successes at all operations, with the Isaac Plains Complex and South Walker Creek setting all time saleable coal production in 2023, and Poitrel set for a very strong 2024 after an all-time quarterly production record in the September quarter.

We are very pleased with how our operations have been performing in recent years, capitalising on strong market conditions, and importantly providing strong cash flows to support our significant self-funded capital investment program.

We are reinvesting more than $600million back into our assets over a three-year period from mid-2022 and includes large scale and complex projects such as the 8.5km MRA2C creek diversion and CHPP expansion at South Walker Creek and Ramp-10 box-cut at Poitrel.

These projects will deliver significant value to our core operating base and solidify their position as cost competitive, high-quality assets.

What is the development potential for Isaac South?

MM: The Isaac Downs Extension (formerly known as Isaac South) project has become the top priority for Stanmore, given it represents a capital efficient pathway to provide production longevity and capacity utilisation at the Isaac Plains Complex overall when mining at the existing Isaac Downs operation becomes economically challenged by increased strip ratios and seam splits.

As the tenure is currently at the exploration permit stage, the largest hurdle to progressing development is obtaining the required mining approvals – a process we believe could take a minimum of 2-3 years.

Nonetheless, we have confidence in the team given our recent track record of obtaining similar approvals for the current Isaac Downs mine in recent years, and our credentials as responsible and reputable operators.