1st Feb 2019 10:57
LONDON (Alliance News) - Baker Steel Resources Trust Ltd said Friday it has acquired 0.75% of gross revenue royalty on the metallurgical coal assets of Futura Resources Ltd in Queensland, Australia.
The transaction also includes the option to acquire a further 0.25% over future coal production from the Wilton and Fairhill properties for a total of AUD8 million, about GBP4.4 million.
Baker Steel Resources will pay AUD6 million for the initial 0.75% royalty.
The additional royalty can be exercised any time up to 45 days following the production of 2 million tonnes of saleable coal.
The Wilton and Fairhill properties contain resources of 2.6 billion tonnes of coal, with 738 million tonnes less than 100 metres below surface.
Production at Wilton is expected to start in mid-2019 with first royalty payments made on a quarterly basis thereafter. Fairhill is expected to move into production in 2020. Aggregate coal production at Fairhill is expected to ramp up to 2.5 million tones per annum of saleable processed coal by 2021 for "at least" 25 years.
Baker Steel Resources is expecting the royalty to generate around AUD3.5 million per year.
The company said: "The shallow open-pittable nature of the deposits supports low operating costs, with the projects expected to be in the lowest quartile of global metallurgical coal operating costs and therefore sustainable through any future cyclical downturn in coking coal prices.
"The markets for both metallurgical and thermal coal have been well above consensus long term average prices in recent times. Whilst in the medium to long term the decarbonisation trend may curb thermal coal demand, metallurgical coal is an essential component of steel making and long-term fundamentals appear supportive for demand and pricing."
Shares in Baker Steel Resources were untraded Friday but last closed at 45.78 pence each.
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