S32 1.95% $2.88 south32 limited

Stanmore has entered into definitive agreements to acquire...

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    Stanmore has entered into definitive agreements to acquire South32’s 50% interest in the Eagle Downs Metallurgical Coal Joint Venture Project and 100% of the shares in Eagle Downs Coal Management Pty Ltd.

    Upfront consideration for the acquisition is US$15M, together with contingent payments linked to first longwall coal and a capped royalty stream contingent to coal price thresholds as outlined below.

    The acquisition provides Stanmore with an attractive, fully permitted development option for a world class hard coking coal underground project which is complementary to its existing portfolio of top tier metallurgical coal assets in the Bowen Basin.

    Eagle Downs is a high-quality hard coking coal development underground project with a substantive resource base of 1,140Mt1 expected to produce premium low-volatility hard coking coal.

    The asset is in close proximity to Stanmore’s assets, providing it with the potential to leverage existing infrastructure and logistics capabilities to drive overall development and operating cost efficiencies at Eagle Downs, as well as providing longevity to Stanmore’s infrastructure portfolio.

    Stanmore is in discussions, and has signed a term sheet, with Aquila, the Eagle Downs joint venture partner, in relation to acquiring a further 30% interest in the joint venture and reshaping the joint venture commercial and governing arrangements.

    https://www.aspecthuntley.com.au/docserver/02771285.pdf?fileid=02771285&datedir=20240212&edt=MjAyNC0wMi0xMyswMDowNjozOCs0ODArOTcwMDE5K2FuZHJld3dlc3QrcmVkaXJlY3QraHR0cHM6Ly93d3cuYXNwZWN0aHVudGxleS5jb20uYXUvaW1hZ2VzaWduYWwvZXJyb3JwYWdlcy9wZGZ0aW1lb3V0Lmh0bWwraHR0cHM6Ly93d3cuYXNwZWN0aHVudGxleS5jb20uYXUvaW1hZ2VzaWduYWwvZXJyb3JwYWdlcy9wZGZkZWxheWVkLmpzcA==

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    Ash here.

    Some will castigate GK & team for being 'Woke'. There is more to S32's strategic decision to reshape its coal interests than pacifying the conservation-minded.

    It exited low quality SA steaming coal due to extreme uncertainty over future demand and the high capital cost to SIB. Yes, we can see good profits for five years, what happens after that?

    Illawarra is a world class asset producing high calorie low ash met coal in high demand. It isn't clear why the operation dropped back to a single long-wall operation from two. There is plenty coal reserves there.

    But Eagle Downs?

    There have been many solid opportunities for S32 to build out, buy quality Bowen Basin coal assets. BHP recently sold two mines to Stanmore for $1.9b, which is likely to make Stanmore holders a lot of money.

    No. S32 is exiting.

    S32's prospects in metals are better, IMHO.

    Ash
 
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