Vale and Aquila bury the hatchet over Eagle Downs

BRAZILIAN mining giant Vale and Aquila Resources have put aside the long-standing legal dispute over their Eagle Downs hard coking coal project joint venture in Queensland in a bid to focus on developing the longwall mine in a low coal price environment.
Vale and Aquila bury the hatchet over Eagle Downs Vale and Aquila bury the hatchet over Eagle Downs Vale and Aquila bury the hatchet over Eagle Downs Vale and Aquila bury the hatchet over Eagle Downs Vale and Aquila bury the hatchet over Eagle Downs


Lou Caruana

The Bowen Central Coal JV, which is 50%-owned by Aquila Coal with wholly owned Vale subsidiary Bowen Central Coal, had been mired in legal controversy over infrastructure and valuation arrangements for Eagle Downs.

“The company is pleased to announce that Aquila has reached agreement with Vale for the settlement and release of each party from all legal proceedings and claims made between them relating to the BCC JV,” Aquila said in a statement.

“Each party will bear its own legal costs in the proceedings and the settlement is unconditional and immediately effective.

“Settlement of the legal proceedings will allow the BCC JV to focus its efforts on developing the Eagle Downs hard coking coal project unimpeded by litigation.”

Agreement has been reached for the addition of Eagle Downs as a source mine for 1.6 million tonnes per annum of contracted port capacity at Wiggins Island coal export terminal stage 1.

The project has about 1 billion tonnes of JORC-compliant resource and is located downdip of BMA’s Peak Downs premium hard coking coal operation.

Uncertainty over the coal markets led the JV to reconfigure the construction of Eagle Downs and delay its completion by more than six months, to the first half of 2017.

Aquila executive chairman Tony Poli said the project – which involves construction, development and operation of an underground longwall hard coking coal mine over an estimated mine life of 47 years for all target seams – now had a budget of $97.2 million in the 2014 financial year.

“In light of continuing softness in the coal price environment, the participants requested Eagle Downs Coal Management Pty Ltd focus on critical path development tasks and reprioritise some of the scheduled early works,” Poli said.

“In response to this request, the manager has presented the participants with a work program and budget for FY2014 of $97.2 million, which has now been approved by the participants.

“The manager has advised the participants that the overall construction schedule will be slightly impacted, with its previously anticipated completion date of November 2016 now being revised to H1 CY2017.”

To achieve the first 100,000 tonnes of longwall production, Aquila’s share of capital expenditure is approximately $630 million and its share of pre-production operating expenditure is about $230 million.

Aquila estimates cash operating costs of about $72 per tonne excluding logistics and royalties.

The longwall mine will be accessed via twin parallel drifts at the shallowest area of the resource, in a bid to minimise capital cost and construction time.

Last December WDS won the $142.8 million drifts contract, which marks the next phase of the project’s construction.

Vale is in negotiations to sell at least 15-25% of its coal portfolio across Australia and Mozambique to focus more on its core iron ore business but has now committed itself to Eagle Downs.