Springsure stage 1 to cost $743M

BANDANNA Energy’s definitive feasibility study has confirmed an estimated $743 million capital cost for development of stage 1 of the single longwall project to produce 5.5 million tonnes per annum.
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Courtesy of Bandanna Energy

Lou Caruana

Stage 2, the establishment of a second longwall and supporting infrastructure to produce a combined total of 11Mtpa, is expected to have an additional cost of $437 million.

Average free-on-board operating cash costs (excluding Queensland government royalties) for the project are estimated at $65.60 a tonne, following completion of both stages of the project.

The DFS concluded that the project provided very positive economic benefits within an estimated net present value range from $700 million to $1.1 billion, depending upon various coal price and foreign exchange scenarios.

“The completion of the definitive feasibility study confirms Bandanna’s confidence in continuing to progress development of the project,” Bandanna managing director Michael Gray said.

“The study demonstrates the extremely competitive cost position of the project compared with much existing and planned thermal coal production in Australia and globally.

“In addition, the study confirmed that the capital intensity of the project was substantially lower than other proposed major coal thermal projects in Australia.

“We have witnessed a significant improvement in prices for construction elements of the project in recent months.

“We will continue to work closely with key contractors and suppliers to further optimise these contract packages and equipment supply offers prior to project execution.”

The company delayed confirmation of the capital cost estimate for the project to take advantage of the recent rapid slowdown in mine development and construction.

It was also done to ensure that opportunities for reduced prices were able to be identified and captured.

“With the announced delays to many other new projects, Bandanna is confident that it will be producing coal at a world competitive cost in a market of increasing demand and limited new supply,” Grays said.

“Springsure Creek remains the only greenfield thermal coal project in Australia for which port and rail capacity is fully contracted and under construction.”

With the finalisation of the DFS, Bandanna is seeking to continue discussions with potential joint venture parties in relation to a strategic investment in the project.

Over the last six months Bandanna has been in discussions with a shortlist of interested parties in relation to both offtake and equity investment in the project.

Springsure Creek Coal, a wholly owned subsidiary of Bandanna Energy, submitted the draft environmental impact statement for the Springsure Creek coal project to the Queensland government for review in November 2012.

Bandanna anticipates the public submission period for the draft EIS will commence in the first quarter of 2013.