PERTH (miningweekly.com) – ASX-listed Stanmore Coal has bought the Isaac Plains coal mine, in Queensland, from project owners Vale and Sumitomo Corporation for $1.

Stanmore would assume all of the outstanding contracts, including transport infrastructure access arrangements and a $32-million rehabilitation obligation associated with the mine.

The company noted that it would be compensated by the vendors for some of the contractual commitments it would become responsible for, with the payments of these expected to cover fixed infrastructure charges and the working capital requirements through to first coal and the ramp-up of operations.

The compensation payments would be repaid to the vendors through a production-based royalty, which would be applied on a coal-price threshold.

The Isaac Plains mine was placed on care and maintenance late in 2014, owing to a major slump in coal prices.  At peak, the mine produced some 2.8-million tonnes of export coal, which was sold to a number of steelmakers in Asia.

Stanmore on Thursday said that, at the current spot market price, the Isaac Plains mine could support an opencut mine with a mine life of some three years, supported by a Joint Ore Reserves Committee-compliant resource of 30.1-million tonnes and an opencut reserve of five-million tonnes.

The coal miner was targeting a restart of mining operations during the first half of 2016, at an initial production rate of 1.1-million tonnes a year. Stanmore noted that lowering production volumes to 1.1-million tonnes would maximise the ownership and operational benefits of the dragline in combination with a single truck-shovel fleet.

Stanmore would use contract mining and coal handling and preparation plant (CHPP) operations at Isaac Plains and was in the midst of running a tender process for contractor selection.

The CHPP had a feed rate design of 500 t/h, which was in excess of the requirements under the restart plan, Stanmore said. The CHPP and train load-out would be run several days a week with nonoperational days to be used for general repairs and maintenance on the site.

Meanwhile, the miner said its key interest in Isaac Plains was the recent acquisition of the Wotonga deposit, in July this year, which was located to the east of Isaac Plains.

“The acquisition of Isaac Plains represents a transformational step for Stanmore. Isaac Plains provides us with all of the necessary infrastructure and sufficient mineable coal to start mining in 2016, while the neighbouring Wotonga deposit is anticipated to provide us with a significant mine life extension at a materially lower cost of production,” said Stanmore MD Nick Jorss.

It was expected that the two projects would deliver significant capital and operational synergies, as Wotonga was expected to produce a similar combination of coal products as Isaac Plains.

To progress development at Wotonga, Stanmore would undertake an extensive exploration programme before the end of the calendar year, which would include confirmatory resource drilling, detailed coal quality laboratory analysis and seismic surveys.

The company would also start the approvals process for a mining lease and all the relevant environmental studies.

Underground operations at Isaac Plains would also be evaluated with the potential to run both sites simultaneously, given the significant capacity in the CHPP and rail infrastructure.

FINANCING
Stanmore on Thursday further announced that financier Taurus Mining Finance Funds had agreed to provide a $42-million interest-only facility, with a term of up to two years. Interest would be payable quarterly at a rate of 10% on drawn funds and 2% on undrawn funds.

The company noted that some $30-million of the funding would be used to cash-back certain financial guarantees relating to the rehabilitation, infrastructure and utilities at Isaac Plains, with the balance available as a contingent working capital amount.

The additional $12-million in working capital funding would provide a buffer for Stanmore, should the company require.

To finance the acquisition of the Isaac Plains mine, Stanmore would contribute A$12-million from its existing cash reserves alongside the financial guarantee provided by Taurus.

Jorss said on Thursday that the transaction represented the culmination of nine months of comprehensive due diligence and negotiations, with over 40 growth opportunities assessed over the last two years, before a decision was made on Isaac Plains.

“We are now working hard towards the transition to mining operations to ensure success in what remains a challenging coal market.”

The transaction with the Isaac Plains vendors contained a number of conditions precedent, including Foreign Investment Review Board approval, and customary ministerial and state government approvals.