- Dartbrook Joint Venture Agreement restructured with new terms agreed
- AQC’s direct working interest in the project increased from 50% to 80% and its net economic interest increased from 50% to 70%
- JV close to finalising a significant portion of restart funding arrangements linked to a new coal marketing and offtake agreement
- Updated mine plan indicates improved yields should be possible with the potential to produce some semi-soft met coal
- Development works progressing to plan – tunnel dewatering substantially complete
- Dartbrook on track for production restart in early Q4 2023
According to the company’s website press release on May 1, 2023, Australian Pacific Coal Limited (ASX: AQC) (“AQC” or the “Company”) has agreed new terms and executed a restructured Joint Venture Agreement (“JVA”) that will underpin the restart of the Dartbrook underground coal mine as planned in early Q4 2023. The binding term sheet announced in September 2022 has been renegotiated and the new JVA will see AQC increase its direct working interest in the project from 50% to 80% and its net economic interest increase from 50% to 70%.
With the JVA in place, the Dartbrook Joint Venture is currently finalising funding arrangements to meet future restart capex and working capital needs. A significant portion of the funding package will be linked to a new coal marketing and offtake agreement and negotiations with an international third party with extensive global coal marketing experience are in the final documentation stage. Once finalised, this agreement and associated funding will materially de-risk the project and provide a clear pathway for additional funding. Discussions for additional funding involve multiple parties that are in advanced stages of due diligence.
Dartbrook Joint Venture
The Dartbrook mine has ROM coal reserves of 470 million tonnes and saleable coal reserves of 370 million tonnes. Operations are expected to ramp up towards a steady state production of approximately 3 million tonnes ROM coal per annum. AQC owns the coal handling and processing plant that is critical infrastructure and negotiations for rail and port access are progressing well. The Dartbrook mine produces a high-quality coal that is typical of Hunter Valley specification. The Operator has recently updated the mine plan which indicates that the Dartbrook mine should be capable of delivering improved yields relative to historical outcomes, and that there exists the potential to produce some semi-soft metallurgical (i.e. coking) coal into the market, which is essential in the manufacture of steel. The quality characteristics and the percentage of the overall volume of product coal that may have coking coal properties suitable for end-users are yet to be fully determined. With a revised mine plan and development works underway, the JV partners are confident of the target date to commence operations in early Q4 2003.
Tetra Resources Pty Ltd (“Tetra”) will be the exclusive Operator of the JV and will continue to support the ongoing operations of the mine. Tetra has been a long-term partner on the Dartbrook project and they have led the operations through the initial development stage including the regulatory, operational and safety requirements associated with the mine.
A key change from the previous JV announcement is that Trepang Services Pty Ltd (“Trepang”) will no longer have a 10% working interest in the project. Instead, Trepang will provide land and water access to the mine via a longterm lease which will be equivalent to an indirect 10% economic interest, with a minimum payment of $5 million per annum, that will be a cost to the JV. Further details on the lease will be provided when the terms are finalised.
Under the terms of the revised agreements, M Resources Pty Ltd (“M Resources”) will no longer be the coal marketing agent but will continue to support AQC by providing ongoing Technical Services advice on marketing and operations. The terms of the advisory role includes a 10% economic interest in the project and advisory fees as outlined in the term sheet attached to this release.
The key terms of the restructured and simplified JV are as follows:
• AQC retains the majority direct working interest which has increased from 50% to 80%.
• Tetra remains a direct JV participant with a 20% working interest and remains the mine Manager and Operator.
• Subject to shareholder and ASX approval, Trepang will no longer have a direct working interest in the JV. Instead, Trepang will provide land and water access to Dartbrook through a long-term lease equivalent to a 10% economic interest, with a minimum payment of $5 million per annum, which will be an operating cost of the JV.
• M Resources will receive a 10% indirect economic interest in the JV through AQC (therefore reducing AQC’s effective economic interest to 70%).
• M Resources will be retained to provide ongoing Technical Services advice to AQC and receive an advisory fee and retainer for its services.
• The JV is currently in advanced discussions with another party for a coal marketing and offtake agreement which is subject to the provision of a significant component of restart capex funding. Negotiations are well advanced and an announcement will be made as soon as documentation is executed.
Australian Pacific Coal’s Interim CEO, Ms Ayten Saridas, said: “We have maintained our focus on achieving the commercial and operational milestones to restart production at the Dartbrook mine in 2023 and I am pleased with the excellent progress made to date. The underground remediation works required to reopen the mine are on track and the team has continued work on the mine plan which has indicated the potential for improved yields and a better mix of coal quality that could ultimately result in better margins on coal sales. With the new JVA in place, AQC is in a stronger position having increased its net economic interest from 50% to 70% which is a significant positive outcome for our shareholders.
“We are also well advanced in implementing the funding package for the remaining restart capex. This will likely be agreed with a third party in conjunction with a new coal marketing and offtake agreement, which we anticipate announcing in the near future.
“This has been a complex negotiation and reflects the tremendous opportunity that the Dartbrook mine presents. Looking forward, while thermal coal prices have moderated from the highs of 2022, demand continues to be strong and Dartbrook’s low cost base gives it the ability to generate solid projected free cash flows, even at current prices. I want to thank our staff, our partners in the project and shareholders for their patience while we negotiated the revised structure. This is a great outcome for all stakeholders, and we are excited about our plans to develop this mine in a sustainable way that demonstrates how mining and agriculture can coexist and deliver benefits to the broader community.”
Tetra Resources Executive Chair, Mr Brian MacDonald, said: “Over the past six months the team on site, led by Michael Mapp, Tetra’s CEO, have made very good progress on preparatory works to restart underground mining operations at Dartbrook. We welcome the successful execution of the JVA and remain focused on achieving production in early Q4 2023.”
M Resources CEO, Mr Matthew Latimore, said: “The Dartbrook underground coal mine is an exceptional opportunity with the ability to restart production in a matter of months. There are few opportunities like this where the coal quality, geological, infrastructure and economic conditions are suitable for development in such a short timeframe. M Resources is pleased to provide Technical Services advice to AQC where we can add value to all aspects of the mine’s operation and commercial activities.”
Capital Expenditure Update
AQCs’ previously published estimate that the Dartbrook underground mine will require capex funding of $100 million to $120 million to enable mining operations to restart in H2 2023 remains unchanged. To date, AQC has advanced a loan to the JV of approximately $10 million to avoid disruption to the development program. This loan will be repaid when the third-party debt facility is executed. A substantial portion of the third-party funding will be linked to a coal marketing and offtake agreement which is currently being agreed with an international third party with extensive global coal marketing experience. Discussions for additional funding involve multiple parties that are in advanced stages of due diligence.
This announcement has been authorised for release to the ASX by the Board of Australian Pacific Coal Limited.
About Australian Pacific Coal Limited (ASX: AQC) and the Dartbrook Project
Australian Pacific Coal Limited (ASX: AQC) is focused on developing, acquiring and value adding thermal and metallurgical coal projects. AQC’s principal asset is the Dartbrook Coal Mine in the Hunter Valley, NSW. The Dartbrook Coal Mine is located approximately 4 km west of Aberdeen and 10 km north-west of Muswellbrook. The Dartbrook site has access to world-class infrastructure, a skilled workforce, and the support industries utilised by major mining companies in the region to serve key customers in Asia.
All enquiries:
Corporate
Murray Aitken, Australian Pacific Coal Limited
M. +61 (0)408 932 158 E. maitken@aqcltd.com
Investors
Matt Sullivan, Meridian Investor Relations
M. +61 (0)412 157 276 E. meridianir@outlook.com
Media
Paul Ryan, Citadel-MAGNUS
M. +61 (0) 409 296 511 E. pryan@citadelmagnus.com
