Whitehaven Coal has entered into an agreement to acquire the 1% private royalty over the Narrabri coal mine in New South Wales held by Anglo Pacific Group plc, which will be effective on December 31. The transaction provides Whitehaven with greater exposure to buoyant coal prices by effectively capping its royalty expense at US$26.6 million plus contingent revenue participation payments. Payments under the revenue participation structure will be largely self-funding.
Keith Ross established the royalty prior to construction of the Narrabri mine. APG acquired the Narrabri royalty from an entity associated with Keith Ross for $65 million in March 2015. Since its acquisition, APG has received approximately $32 million in royalty income, with a further $1 million to 2 million expected before the end of the year.
“Narrabri is a great asset with a great future and today’s deal will ensure Whitehaven captures even more of the value from its potential,” Whitehaven CEO and Managing Director Paul Flynn said. “With coal prices at record highs, today’s acquisition is indicative of the opportunities that are emerging in the global energy complex.”
Narrabri has 167 million metrics tons (mt) of marketable reserves.
“During recent weeks, thermal coal prices reached record highs, which we will see reflected in significant cash generation over the coming months,” Flynn said. “After a challenging period at Narrabri, we are readying for the longwall changeout ahead of a more productive second half.”
Following the previously reported major repairs to the longwall after mining through fault-affected ground, mining has returned to more normal levels. Narrabri’s third-quarter raw production amounted to 1.5 million mt.
The next longwall move from panel 109 to 110 is scheduled for November, with longwall production to recommence in late December.
