Stanmore Coal has defied the downturn in the coal sector to become Australia’s newest coking coal producer.
Since taking formal ownership of the mothballed mine for $1 in November 2015 from Vale and Sumitomo, Stanmore has re-started operations and produced first coal in April 2016, creating more than 150 direct jobs.
The mine will produce 1.1 million tonnes per annum of coking coal for export to Asian steel mills, generating yearly royalties of more than $7 million to the Queensland government. With expansion plans, royalty payments from the mine are expected to grow in coming years.
As part of the acquisition, Stanmore also took ownership of more than $350 million of operating assets including a dragline, coal handling plant and train loading facilities that will support both the Isaac Plains mine and the company’s neighbouring Isaac Plains East deposit.
What Jorss has effectively done is set the bar incredibly high for other bottom feeders keen to pick up quality assets at knock down prices.
“We have gone against the tide in the coal sector to create value for our investors and the central Queensland community,” he said.
“We believe we’ve picked the right point in the cycle to shift from explorer to exporter with operating costs reduced by 35%.”
The race is on for cashed up buyers to go out and pick up quality assets being put on the market by major companies keen to repair their balance sheets. On the buyer side, there are a few astute investors who want to make counter-cyclical acquisitions while times are tough to capture some growth when it hopefully returns to the market.
Anglo American has put its entire coal mining division on the block, which contains such crown jewels as Moranbah North and the just-completed Grosvenor coal mine. It wants to sell Moranbah North and Grosvenor as a kind of two-for-one offer.
The word is that there is a private equity mob kicking a few tyres and that even BHP Billiton Mitsubishi Alliance has run the ruler over the Anglo American operations in its bid to be the undisputed sovereign of the Bowen Basin coal empire.
There is also a story doing the rounds that Rio Tinto may be trying to sell its Hunter Valley coal operations, which includes the Mt Thorley Warkworth complex, to Glencore.
But it appears the sale price may still be too high for potential buyers, despite Mt Thorley Warkworth getting its long awaited approval from the New South Wales government to proceed with an expansion.
Then there is Peabody Energy, who is in Chapter 11 Bankruptcy Protection in the US and who is trying to offload any spare piece of coal mining real estate it deems to be saleable in the current depressed circumstances.
The company has repeated that its Australian operations are not affected by the bankruptcy but when the mothership is sinking, anything too heavy could be tossed overboard.
So in this dire situation, with so much talk of asset sales and merger and acquisitions - enough to make any investment banker salivate – the humble but astute Jorss and Stanmore Coal has sent the benchmark of how to pick up a bargain and create a functioning coal mine in the process.
