With the completion of the BFS, the company is ready to embark on finance discussions for the Baralaba expansion project, which will have a net present value of more than $1 billion, according to Cockatoo managing director Andrew Lawson.
"The results of the supplementary BFS show that Baralaba will be in the lowest operating cost quartile of the premium PCI producers and will be in the lowest cost quartile on the basis of capital intensity for proposed Australian metallurgical coal developments," he said.
"Recent poor earnings results in the sector and concerns regarding the viability of new coal projects and expansions have severely impacted the entire coal sector.
“But our view is that over the next year we will generate strong earnings on the back of our low-cost ultra low volatile PCI production, and the positive results of our study show that we will have an outstanding project to take advantage of the strengthening ULV PCI market."
Market intelligence indicates that June 2013 quarter ULV PCI coal prices have recently settled at $US135-141 per free-on-board tonne, up approximately 15% from the March 2013 quarter, depending on the coal quality and end-users involved.
Baralaba’s calendar year 2013 budgeted cash cost is approximately $A100/FOBt (excluding royalties), which is at the low end of the cost curve for Australian ULV PCI producers.
Cockatoo believes the ULV PCI metallurgical coal supply will continue to be constrained by a lack of mine and port developments in the medium to long-term future, while the demand growth forecast for the niche product remains strong.
The Baralaba mine complex would have a mine life of 20 years and an initial capital expenditure of $311 million, according to the BFS.
The company has managed to reduce the cash operating cost down from $105/t to $96/t by reconfiguring the mine plan to reduce the strip ratio, size of the fleet and surface infrastructure requirements and renegotiating with suppliers and contractors off the back of recent downward cost pressures in the mining sector.
Cockatoo said a number of funding alternatives, including selling a partial interest in the Baralaba expansion, strategic investments at the corporate level and project debt financing, were being progressed to finance the project.