Bowen to resuscitate Burton coal mine
Days after being awarded preferred bidder status for Carabella Resources’ suspended Bluff coal mine, Queensland-focused Bowen Coking Coal has signed a “transformational” binding term sheet for a 90% interest in the suspended Burton mine and adjacent resources.
The terms sheet with New Hope Corporation would see a A$20 million up-front payment to New Hope Corporation for an interest in the surrounding Lenton joint venture, which includes Burton, a 5.5 million tonne per annum coal handling plant, haul roads and train load-out facilities.
The purchase price must be at least $10 million cash, and there are further milestone and royalty payments capped at $77.5 million.
Burton operated for almost 20 years, before being suspended in 2016 by then-owner Peabody Energy due to low coal prices.
Bowen aspires to become a significant multi-mine coking coal producer, with Bluff, Burton and its existing production plans at the nearby Broadmeadow East, and Isaac River projects, in the heart of the Bowen coal basin.
Burton would give it a central hub, with replacement value ascribed to the infrastructure of $300 million.
It believes Burton can be back in production within 12 months, six months after Broadmeadow East and Isaac River.
Bowen is targeting annual production of 5Mtpa by 2024.
The Lenton JV comes with resources of 204 million tonnes and reserves of 30Mt, spread between the Burton open-cut mine and the undeveloped New Lenton deposit. New Lenton also comes with a substantial thermal coal resource, but Bowen says the fossil fuel potential is secondary.
Overall, it increases Bowen’s total resources from 322Mt to 505.6Mt.
With visions of a processing hub firming, coal investors Brian Flannery and Matt Latimore have agreed to substantially underwrite the bulk of a $15.4 million placement and rights issue with Petra Capital at 6.7c, a 4.5% discount to recent trading levels.
Latimore is currently a Bowen director. Flannery’s family company, Ilwella, will end up with 8.6% of Bowen.
Taiwan-based conglomerate Formosa, a partner in Fortescue Metals Group’s Iron Bridge magnetite iron ore project, owns the remaining 10% of the Lenton JV.
Bowen has around $3 million cash, having recently paid a A$250,000 deposit for the chance to enter exclusive negotiations over the next four weeks to secure ownership of the Bluff PCI mine.
Bowen shares, which have traded between 4.2-10.5c over the past year, were up 15% today to 9.8c, capitalising it at $83 million.
New Hope’s stock, which has traded between $1.05-2.08 over the last 52 weeks, was steady today to $1.90, valuing it at $1.6 billion.