RFC Ambrian said it is working with a new private coal company – Sekitan Resources – which is aiming to acquire the 611 million tonne resource Wilkie Creek thermal coal project in Queensland which is owned and was previously operated by Peabody Energy.
This asset was almost sold to Nathan Tinkler last year for $150 million, but that deal ultimately collapsed after he failed to make a final payment.
“Sekitan and its experienced management team will be purchasing the asset for just $US10 million,” according to RFC Ambrian.
“Currently on care and maintenance, Peabody has borne all the shut-down costs. Sekitan has approached the project with a ‘clean sheet of paper’ and reset the cost base.”
First production is scheduled for 1Q16, at an annual rate of 3Mtpa, with cash costs of $A69/t (versus 2.4Mtpa at $A110/t under Peabody). The current market price is around $80/t.
The approximate 50% cash cost fall is attributable to a 30% cut in the workforce, a reduction in costs per person, right-sized mining equipment and an enhanced yield, according to RFC Ambrian
Expansion opportunities to 5Mtpa or more are available.
The fund requirements to restart operations are $95 million in total. This includes a $30 million environmental bond guarantee, a $10 million port bond guarantee and $55 million for capex and working capital.
“Previous buyers of Wilkie Creek output have expressed interest in Sekitan’s product, and believe that 3Mtpa would be straightforward to place. Peabody marketing has also expressed an interest,” RFC Ambrian said.
The Australian Financial Review’ Street Talk column said on Friday it understood Peabody was handling the sale of its exploration permits and would be hoping that miners, including neighbouring players in Queensland, see in it “synergies”, or a cost-effective way to access low cost resources, if future market conditions are right.
“It could also be a way to ease in and start testing broader appetite for Peabody's operating assets. Some industry players have suggested Peabody has designs on an exit from Australia,” the column stated.
The column further asked who would be interested in Peabody’s Australian coal assets under the current coal downturn.
“The local coal market is awash with assets for sale, many of them decent, but very few sellers are distressed and deals have failed to materialise despite an extended price malaise that shows little sign of improving,” the newspaper commented.
A spokeswoman for Peabody Energy told ICN:"As noted in our April earnings release, Peabody is advancing a strategic review of our portfolio of Australia tenements as part of a heightened emphasis on portfolio optimization."
