Macarthur extends footprint in Bowen Basin

MACARTHUR Coal will acquire the majority of a contract miner that owns the MDL162 coal mining tenement in Queensland’s Bowen Basin with funds raised through a $A438.7 million institutional placement that was successfully completed yesterday.
Macarthur extends footprint in Bowen Basin Macarthur extends footprint in Bowen Basin Macarthur extends footprint in Bowen Basin Macarthur extends footprint in Bowen Basin Macarthur extends footprint in Bowen Basin

Greg Rowan, senior inspector of mines, Queensland Government Natural
Resources & Mines

Lou Caruana

The placement was well received with Macarthur’s two largest shareholders, the CITIC Group and ArcelorMittal, both participating despite Macarthur yesterday reporting that its 2010 financial year net profit after tax had declined 26% year-on-year to $125.1 million.

Macarthur chief executive and managing director Nicole Hollows said MDL162 would enhance Macarthur’s footprint in the Bowen Basin and provide additional exposure to export quality metallurgical coal.

“MDL162 is expected to begin producing after 2014 and will produce up to 6 million tonnes per annum ROM coal at full run rate,” she said.

“This allows us to increase the number of ports available to Macarthur for exports from two to three.”

Macarthur entered into an arrangement with MCG Resources and Fortrus Resources for Macarthur to provide funding of $360 million to MCG Coal Holdings, which is wholly owned by the MCG Companies.

A wholly owned subsidiary of MCGH has entered into an unconditional purchase agreement with Queensland government utility Stanwell Corporation to acquire MDL162.

Of the funding to be provided by Macarthur, $334.35 million will be used by MCGH to complete the purchase of MDL162 from Stanwell.

The remaining $25.65 million will be used to fund further exploration work and a bankable feasibility study for MDL162.

Macarthur and the MCG Companies have plans to develop an open cut mine, with Macarthur having the right to market all coal produced from the tenement.

MDL162, located near the town of Blackwater and a number of existing operations, including Curragh, Curragh North, Blackwater, Yarrabee and Jellinbah, is also close to established rail and road infrastructure.

Geological studies suggest that seams in MDL162 have the potential to produce semi hard coking coal and pulverised coal injection coal.

MDL162 has been subject to an exploration program and has a JORC Resource, and will result in an increase of attributable resources to Macarthur of 199.5Mt.

MCGH will undertake further exploration with a view to achieving a JORC reserve and apply for Wiggins Island Coal Export Terminal’s supplementary stage capacity to enable production to commence after 2014.

Results

Macarthur’s sales for the 2010 year were up to 5.3 million tonnes leading to revenues of $670.5 million, a 3.6% decline year-on-year.

The result, which is at the top end of market guidance, was achieved despite subdued demand for the company’s low volatile PCI coal and lower coal prices for the first three quarters of the financial year as a result of the global financial crisis, Macarthur chief executive and managing director Nicole Hollows said.

“Going into the year it was not clear that the global economy would improve,” she said.

“However, when demand showed signs of recovering, the company moved quickly to increase production and deliver a record level of sales.

“It is pleasing to see the early decision to return both Coppabella and Moorvale mines to full production resulted in a record level of coal sales for the company.

“Macarthur Coal secured substantial spot market sales for PCI coal to non-traditional customers during the first half of the year and, in the second half, returned to supplying our traditional markets as demand gradually recovered.

“We are committed to achieving sales of 9.2 million tonnes per annum by 2014 by

continuing the development of the Middlemount Mine project and evaluating options for a fourth mine from our tenement portfolio.

“Our successful capital raising in June and July 2009, combined with strong operating cash flows, has us well positioned.”

Macarthur’s shares, which came out of a trading halt this morning, were 86c lower at $11.50.

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