“Aquila in five years time will be a significant company,” executive chairman Tony Poli told delegates at the ASX Emerging Companies Conference in London this month.
He said Aquila had six major projects it wanted to develop, which would give the coal, iron ore and manganese miner and explorer earnings before interest, taxes, depreciation and amortisation of $A1 billion when in full production in 2015.
Aquila has a cash balance of $350 million, a figure it will add to with the sale of its 24.5% share in the Belvedere coking coal project near Moura in Queensland.
Belvedere partner Vale, which holds 51%, will have the option to purchase Aquila’s share in the project in early June.
Poli said if Vale decided not to exercise the option, Aquila would seek to sell to third parties. Southern Cross Equities has valued Aquila’s share of the project at $444 million.
“So when you add that to [the] current cash balance of $350 million, we are well on our way to meet the equity component of the requirement of these [future] projects,” Poli said.
Aquila has one working coal mine – the Isaac Plains open cut near Moranbah in Queensland –which has been in production since November 2006.
Poli said the mine had sold just as much coal in the past six months as it had in the previous year.
At the time of the conference, Poli said Aquila was expecting approval shortly to increase capacity from 2 million tonnes of ore per annum to be able to treat 3.6Mtpa run-of-mine coal to produce 2.8Mtpa of clean coal.
The increased production will extend the mine life to 17 years.
As well as increasing throughput, approval would allow Aquila to use a dragline at the project, which it has already acquired and partially assembled. If all goes well, the dragline should be up and running at the mine by January 2011.
Poli said the dragline would maintain costs of $80/t free on board.
A big longwall development on the cards for Aquila is the 894Mt resource, 50:50 Eagle Downs joint venture with Vale.
Aquila plans one longwall for Eagle Downs with an 80-year mine life, but is also looking at the possibility of introducing a second longwall and reducing the mine life to 40 years.
“We have conducted seismic over the entire tenements area and we have a strong confidence of the underground mining conditions,” Poli said.
Despite Aquila this month beginning legal proceedings against Vale over defaulting on a joint venture agreement committing to infrastructure arrangements, which Aquila says will push the project back by two years, Poli said at the conference that Eagle Downs would hit full production of 4.6Mtpa in 2014-15.
He expects the Eagle Downs mining lease to be in place by the end of this year and construction to start in the third quarter of 2011.
Capital expenditure on the project is expected to be around $1 billion, which Poli says gives the mine a payback period of one year given today’s coking coal price and a cash cost of $80/t.
“With a mine life of 80 years, it’s quite a valuable asset,” he said.
Aquila’s other coal project on the cards is the 100%-owned Washpool project near Blackwater in Queensland.
Poli commented the project was “simple, shallow and open pit”, giving the mine a quick turnaround to production.
A feasibility study is expected to be released in the next few weeks and Aquila will aim to produce 1.6Mtpa of hard coking coal, with production kicking off late 2012.