South32 Ltd. has completed the acquisition of a 50% interest in the Eagle Downs metallurgical coal project in Queensland’s Bowen Basin. South32 has also assumed operatorship with the other 50% interest in the project held by Aquila Resources Pty Ltd. (Aquila), a subsidiary of BaoWu.

The consideration comprises an upfront payment of approximately US$106M, a deferred payment of US$27M due three years after completion, and a coal price linked production royalty that will also be payable and is capped at US$80M. The upfront payment has been funded from the group’s cash reserves.

“The acquisition of Eagle Downs embeds another attractive development option within our growing portfolio, with the upfront payment representing a minor premium to the historical infrastructure spend reflecting our move to operating control,” said South32 Chief Executive Officer Graham Kerr. “We are pleased to be able to further strengthen our long-standing relationship with BaoWu and look forward to working with Aquila to commence the final feasibility study to optimize the mine design and development.”

Subject to the feasibility study, South32 and Aquila plan to construct a multiseam underground longwall metallurgical coal mine and processing plant with a dedicated rail spur and train loadout facility.

Eagle Downs is a large, high-quality and fully permitted metallurgical coal development project located approximately 25 kilometers southeast of Moranbah. The project was placed under care and maintenance in late 2015 having benefitted from initial investment that delivered site infrastructure, including water supply and high voltage systems, office buildings and water and sediment dams. Dual 2-km drifts are also approximately 40% complete.