Major CVRD deal for Aquila

PERTH-based explorer Aquila Resources has signed a deal with Brazilian mining giant CVRD that will give the major an option to acquire an initial 51% interest in the Belvedere underground coal project in Queensland for a total $US95 million.
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Aquila Resources chairman Tony Poli

Jesse Riseborough

The terms of the deal will see CVRD pay both Aquila, and its current joint venture partner AMCI Holdings, $US2.5 million in the next eight days with a further $US45 million required to be paid to each party for CVRD to acquire a 51% interest in the project – following an 18 month study by CVRD.

If the option to move to 51% is exercised by CVRD then both Aquila's and AMCI's stake would dilute to an equal share of 24.5%.

AMCI is a private US company that produces and markets coal and is led by former MIM coal executive Brian MacDonald.

The deal is reliant upon the successful completion of an 18-month exploration study to be undertaken by CVRD, at which point the Belvedere coal joint venture will be formed. CVRD will also have an option to increase its stake in the project to 100% "at fair market value determined at the time of exercising each option".

Aquila chairman Tony Poli told the company was extremely pleased to have attracted such a significant joint venture partner in CVRD.

Poli said there was a timeframe set on the exercising of the 100% option but declined to disclose it. He added that CVRD's study would start very shortly and would involve drilling, coal quality studies and underground mining studies.

The Belvedere project covers an area of and contains an indicated and inferred resource of more than 2.7 billion tonnes of hard coking coal, with a potential 40-year mine life. Aquila has previously stated that recoverable coal from the three longwall mines would be 571 million tonnes, with a yield of 80-85%.

Poli also declined to rule out any future deal with CVRD, the world's largest iron ore producer, with respect to its iron ore ground.

"There is no understanding at all with respect of iron ore – it is based purely on coal. But obviously if we are successful in delineating a iron ore resource, we start drilling hopefully in September, then clearly there is the opportunity of considering that as well – it is certainly not precluded," he said.

"There is synergy there obviously."

Poli said the company had an exploration budget of $A6 million, up until December next year, at its iron ore projects in Western Australia. The company is in a joint venture with Helix Resources at the Yalleen project in the Hamersley region of Western Australia.

Meanwhile Poli said the Aquila's lengthy damages claim for $A153 million was progressing and the company was presently in the process of providing all of its witness statements to the Federal Court. Poli said at this stage the trial looked likely to begin in the first half of next year.

The damages claim is in relation to its failed bid to acquire Pasminco's 49% stake in the Ernest Henry copper-gold mine in 2001. The dispute relates to representations made by Pasminco to Aquila in seeking an extension to the pre-emption period for the sale of the 49% stake.

Poli was previously involved in a company called Eagle Mining who was taken over in the 1990s by the Joe Guntick's Great Central Mines. The deal was believed to be worth around $A250 million.

Three of the former Eagle directors are now at Aquila.