(EnergyAsia, March 4 2013, Monday) — Australia’s Hodges Resources said it may acquire metallurgical coal resources in the US to build up its coal portfolio while BHP Billiton is looking to close one of its mines in Queensland state.
Hodges Resources said it has signed a binding heads of agreement with Specialty Metallurgical Coal Assets to acquire its 100% interest in the leases, options over leases and associated infrastructure within Knox County in Kentucky state.
For a total cost of US$2 million and a 4% royalty, Hodges said it will fully secure four permitted mining leases and a facility which includes permitting for a wash plant, along with options over additional leases and other equipment. At a later date, Hodges said it will pay an additional US$2 million on for the successful completion of milestones.
The Knox project consists of four permitted mining leases containing the speciality metallurgical coal suitable for surface mining and one currently permitted rail loadout. Hodges will undertake a detailed technical study on the optimisation of the mining and mine development during the 90-day due diligence period.
The company aims to explore and prove up between 12 and 16 million tonnes of hard metallurgical coal, which are selling at “premium prices”.
Hodges’ managing director, Mark Major, said:
“Specialty metallurgical coal is commanding a premium price of around US$225 per tonne. Through a structured transaction with performance conditions for the vendor, for a relatively small outlay, Hodges has secured a potential near-term production asset selling into a market with a strong demand profile and stable outlook.
“The company is delighted to have the opportunity to acquire an option over such a high valued commodity in a developed economy with established infrastructure.”
Hodges said the Knox project represents a strategic move to balance its coal portfolio which now includes a highly prospective but longer-term thermal coal project in Botswana in Africa.
“This is a low cost entry into the US metallurgical coal markets and exposure to a potentially near term production opportunity is a material development for the Company. The expected timeline to production is estimated to be 3-6 months, which will provide cash flow and new growth opportunities for Hodges as we continue develop our larger project in Botswana,” Mr Major said.
Separately, BHP Billiton Ltd, the world’s largest mining company, said it is planning to sell its partially-closed Gregory steelmaking coal mine which has come under pressure from weak market conditions since last year. The company shut down the mine’s open-cut operations last October.