SYDNEY, AUSTRALIA: Stanmore Resources Limited (ASX:SMR) has signed a definitive agreement with a subsidiary of South32 Limited (ASX:S32) to acquire its 50% interest in the Eagle Downs metallurgical coal project, 100% interest in Eagle Downs Coal Management Pty Ltd and associated assets in Queensland, Australia.

The deal, which is expected to close by the end of the second quarter of 2024, will see Stanmore pay US$15 million in cash upon completion, US$20 million upon first 100,000 tonnes of coal being mined from longwall methods, and a capped royalty of up to US$100 million linked to average coal index price thresholds.

Stanmore will also assume all obligations related to potential contingent royalty payments to Vale Australia Holdings Pty Ltd, applied to 50% of all future coal sales revenues capped at US$80 million and subject to minimum coal price thresholds.

The other 50% interest in the project is held by Aquila Coal Pty Ltd, a subsidiary of China Baowu Steel Group Corporation Limited. Stanmore will be the manager of the joint venture through its 100% ownership in Eagle Downs Coal Management Pty Ltd.

Stanmore said the acquisition of Eagle Downs is consistent with its ambition to expand its footprint in Queensland’s premium metallurgical coal basin. Eagle Downs is a high-quality project underpinned by a substantial resource base, which provides an exciting development opportunity that is complementary to Stanmore’s broader portfolio and in close proximity to its existing operations.

The project has a partially built underground access drift and all regulatory approvals are in place for restart of development and operations. The primary product is expected to be a low-volatile premium hard coking coal, which would be attractive to a range of potential customers.

Eagle Downs would add longevity to Stanmore’s production profile and existing infrastructure assets in the area. There is potential to reduce the overall development costs for Eagle Downs by leveraging Stanmore’s existing infrastructure, including its Isaac Plains Complex and Dalrymple Bay Coal Terminal.

Stanmore’s Chief Executive Officer and Executive Director, Marcelo Matos, said: “We believe we can bring our strong technical capabilities, as well as unique infrastructure and logistics portfolio, which will enable Stanmore to unlock the full value potential of Eagle Downs and provide a capital efficient pathway for any future development decision.”