Dec 02, 2016

Pembroke advances prime real estate in coal

Pembroke advances prime real estate in coal Groundwater monitoring is under way for environmental baseline surveys.

Pembroke Resources executives were on the hunt for nothing short of a world-class metallurgical coal asset when they stitched together a $120 million deal for three Bowen Basin projects early this year.

The Australian-based company aims to start mining by 2020 at the Olive Downs South-Willunga complex, expected to produce 15Mtpa at full capacity and employ about 1000 people.

In the near term, it is moving to begin production at the smaller Olive Downs North site 30 km south of Coppabella, which already has a mining lease approved.

“We had a ‘hit list’ of assets in this region for many years and wanted to take the opportunity of a market that was suffering at the time to buy a world-class asset,” Pembroke Resources chief executive officer and managing director Barry Tudor said.

“We weren’t focused on getting something that would be a quick deal. We said let’s buy something that is rare, because most of the majors don’t really sell off top-tier assets.”

Pembroke Resources CEO and managing director Barry Tudor .

The Olive Downs package, acquired from Peabody Energy and CITIC Resources Holdings subsidiaries in April, gave the group a chance to develop a major operation from scratch and do things its own way, Mr Tudor said.

“That means engaging with stakeholders at a local level – landholders, native title holders, local government and local communities and we can adopt world’s best practice in developing a new mine,” he said.

Pembroke Resources was formed in 2014 with a funding commitment from private equity firm Denham Capital and a specific brief to target metallurgical coal.

At its core is a group of executives with Australian coal industry experience, particularly with Gloucester Coal and Noble Group.

Mr Tudor said the group could bring its first operation – Olive Downs North – online within six to nine months of gaining approval from the Japanese joint venture parties that maintained a minority stake in the asset.

The planned open-cut mine would produce about 1Mtpa over a mine life of ten years and employ about 250 people.

It would use the wash plant and rail loop that services Peabody’s neighbouring Moorvale mine, Mr Tudor said.

The larger Olive Downs South-Willunga complex would be a standalone operation with its own wash plant, rail spur and loop.

“We’d like to bring that one on in 2019 at its first stage,” Mr Tudor said. “We’re not talking 15Mtpa from the day we get our mining lease – it will take time to ramp up to that size, but we would like to start production in 2019-20.”

That operation had the potential to produce 15Mtpa for more than 37 years, he said.

While coking coal prices had improved significantly since Pembroke Resources made the acquisition, Mr Tudor said the Olive Downs complex was a good quality asset not dependent on such high prices to be viable.

“This is a very low cost mine, so while we are excited by the increase in prices we don’t expect that it’s going to stay up that high and we don’t need it to stay up that high,” he said.

While Pembroke’s main focus would be the Olive Downs development, Mr Tudor said it remained interested in acquiring further assets in the Bowen Basin in particular.

“We’re very choosy – it would have to compare favourably to this asset, but the answer is ‘yes’ we are looking for other assets,” Mr Tudor said.

He believed the Bowen Basin was the place to be if you wanted to be a world-class metallurgical coal producer.

“It’s a mature industry, it has very good infrastructure, a very good skills base and very good coal,” he said.