Sumitomo completes purchase of Isaac Plains interest

JAPANESE conglomerate Sumitomo Corp has purchased half of Aquila Resources’ Isaac Plains hard coking coal mine in Queensland for $430 million, indicating it wants to expand its presence in the local coal industry beyond its current 10% share in Xstrata’s Newlands and Collinsville mines.
Sumitomo completes purchase of Isaac Plains interest Sumitomo completes purchase of Isaac Plains interest Sumitomo completes purchase of Isaac Plains interest Sumitomo completes purchase of Isaac Plains interest Sumitomo completes purchase of Isaac Plains interest

Aquila's Isaac Plains mine.

Lou Caruana

Sumitomo has also agreed to a right to participate between 20% to 50% in the exploration rights of mining areas in Queensland currently owned by Aquila – up to a maximum of 21 mining areas.

Sumitomo was able to make the acquisition after Aquila’s former project joint venture partner Vale did not take up its pre-emptive right on the stake.

Isaac Plains is an open cut mining operation that commenced production in 2006, with an annual production capacity of 2,800,000 tonnes, of which coking coal for steel production accounts for approximately 70% with the remainder thermal coal.

Sumitomo said most of the production would be supplied for export to Asian countries including Japan.

“The Isaac Plains coal mine, for which the right to use railway and port infrastructure has already been secured, is a comparatively low-risk and productive coal mine that possesses effective measures to guard against floods,” Sumitomo said in a statement.

“In addition, Upon completion of evaluation of fair market value of the exploration rights currently underway by a third party organisation, Sumitomo Corporation will determine its level of participation in the exploration rights as well as its participating ratio based on the FMV.

“Sumitomo Corporation positions this participation as one approach to acquire a potential development project for the growth of mid to long-term earnings.”

Sumitomo plans to accumulate valuable assets in resources industries in order to maintain sustainable growth in the medium- and long-term. Potential acquisition opportunities including coal mining assets have become more and more limited these days, it said.

“Given that it takes much time to develop new resources once an investment decision has been made to begin supplying resources from a mine, which has a limited lifespan in terms of productivity, it is essential to take a proactive investment strategy and human resource development plan that looks ahead five to ten years or more into the future,” the company said.

Sumitomo will accumulate expertise and know-how for use in future projects and will cultivate human resources. It will support a sustainable supply of coking and steam coal with the aim of “helping stabilise coal supplies throughout the world, and particularly to foster the growth of steel and electricity businesses in Asian countries, including Japan”

Aquila intends to sell its share in Isaac Plains so it can gain funds to construct its coal and iron ore assets.

Offloading its stake in Isaac Plains will also help the company secure two-thirds of the equity funding required for construction of the West Pilbara iron ore project in Western Australia once its 24.5% of the Belvedere coal project sale is concluded.

Isaac Plains has a production capacity of 2.8 million tonnes per annum and produces a mix of metallurgical and thermal coals.