South32 will assume operational control of the Eagle Downs metallurgical coal project in Queensland’s Bowen Basin after signing a deal with BaoWu Steel Group subsidiary Aquila Resources.

South32, which owns north-west Queensland’s Cannington mine, will acquire a 50 per cent interest in the project.

The deal includes an upfront payment of about $140 million  ($US106 million) upon completion of the acquisition and a deferred payment of
$35.7 million ($US27 million) due three years after completion.

A coal price linked production royalty will also be payable and is capped at $106 million ($US80 million).

Eagle Downs is a large, high quality and fully permitted metallurgical coal development project located about 25km south-east of  Moranbah and down dip of BMA’s Peak Downs mine.

The project was placed under care and maintenance in late 2015 after initial development work that delivered site
infrastructure including water supply and high voltage systems, office buildings and water and sediment dams.

Dual 2km drifts are also about 40 per cent complete.

Following completion of the acquisition and assumption of operatorship (expected in early 2019), South32 proposes to
commence a final feasibility study which will seek to optimise the mine’s design and development.

The company said that subject to the findings of that study and requisite approvals, South32 in partnership with Aquila would construct a multi-seam underground longwall metallurgical coal mine and processing plant with a dedicated rail spur and train load-out facility.