Stanmore Resources to acquire 50% interest in Eagle Downs from South32

South32 (ASX: S32) has entered a binding agreement to divest its 50% interest in the Eagle Downs metallurgical coal project to Stanmore Resources Limited (ASX: SMR).

The consideration for the transaction comprises $23m (US$15m) payable at completion, a contingent payment and a price-linked royalty.

The other 50% interest in the project is held by Aquila Coal Pty Ltd, a subsidiary of China Baowu Steel Group Corporation Limited.

Stanmore has signed a term sheet with Aquila, the Eagle Downs joint venture (JV) partner, in relation to acquiring a further 30% interest in the joint venture.

Stanmore chief executive and executive director Marcelo Matos says the acquisition of Eagle Downs is consistent with Stanmore’s ambition to expand its footprint in Queensland’s premium metallurgical coal basin.

“Eagle Downs is a high-quality project underpinned by a substantial resource base, which provides and exciting development opportunity that is complementary to our broader portfolio and in close proximity to our existing operation,” he said.

“We believe we can bring our strong technical capabilities, as well as unique infrastructure and logistics portfolio, which will enable Stanmore to unlock the full value potential of Eagle Downs and provide a capital efficiency pathway for any future development decision.”

Stanmore will be the manager of the JV through its 100% ownership in Eagle Downs Coal Management Pty Ltd (EDCM).

Eagle Downs is a metallurgical coal project close to Stanmore’s assets, about 20km from Moranbah in Queensland and directly south of Stanmore’s Isaac South (EPC755) exploration permit.

It is a high-quality hard coking coal development underground project with a resource base of 1,140mt expected to produce premium low-volatility hard coking coal.

“Stanmore is uniquely positioned to leverage our existing infrastructure portfolio at Poitrel and Isaac Plains to support an optimised development plan for the project, and utilis e our existing rail and port capacity as a key investment enabler,” Mr Matos said.

“Eagle Downs also has a strong strategic fit in our portfolio, extending the life of our operations in the area given the relatively shorter mine life at Poitrel and the Isaac Plains Complex.

“This is in line with our commitment to developing options for expanding and increasing the longevity of our business in the area by leveraging our strong existing infrastructure position.”