Aquila Resources to sell Australian coal assets

Chinese-Australian mining firm Aquila Resources has begun selling its Queensland coal assets in Australia, as it capitalises on strong coal prices and turns to developing an iron ore project in Western Australia (WA).

Aquila, which is owned 85pc by China's Baosteel and 15pc by Australian mining firm Mineral Resources (MinRes), has put its 1.9mn t/yr Walton low ash, low-volatile PCI coal mine and 3.6mn t/yr Talwood coking and thermal coal mine in Queensland up for sale. The proposed sale follows this month's agreement by UK-Australian mining firm BHP to sell its 80pc stake in the BHP Mitsui Coal joint venture to Stanmore, as high metallurgical coal prices increase merger and acquisition activity.

There are several possible buyers of the Aquila assets, including Australian firms Fitzroy Resources, Bowen Coking Coal, QCoal, Whitehaven and Stanmore, as well as Japanese firms Sojitz and Idemitsu, and US-Australian coal mining firm Coronado. All are looking to expand metallurgical coal output to capitalise on record high export prices. Stanmore may be too busy bedding down its BMC acquisition to participate, but those that missed out may be interested in the Aquila assets.

Walton is the most advanced of the two projects, with the environmental approvals process underway, while Talwood is in early stage studies and would take some time to come to market.

Baosteel bought Aquila for $1.4bn in 2014, which also gave it 50pc of the 4.5mn t/yr Eagle Downs hard coking coal mine. The other 50pc is owned by Australian-South African mining firm South32, which decided not to proceed to develop Eagle Downs at the beginning of 2021 and signalled its intention last month to divest its stake. It is unclear if Aquila intends to sell its stake in Eagle Downs or the 2.6mn t/yr Washpool hard coking coal project, which is also in Queensland.

Aquila also holds 50pc of the 30mn t/yr Australian Premium Iron (API) project in the Pilbara region of WA. MinRes, which is based in WA and focused on iron ore, acquired its stake in Aquila in June from rail firm Aurizon and was clear that its interest was in the API project rather than the Queensland coal assets.

Spot premium hard coking coal prices more than trebled from early May to a high of $409.75/t fob Australia in mid-September before easing slightly. Argus last assessed the premium hard low-volatile coking coal price at $375.50/t fob Australia on 15 November, up from $110.95/t on 11 May. Lower grade metallurgical coal prices have also increased at a slightly lower rate. Argus last assessed the PCI low-volatile price at $252.50/t fob Australia, down from a high of $282/t on 22 October but up from $106.50 on 17 May.

By Jo Clarke

Metallurgical coal prices $/t