South32 may sell 50% stake in Eagle Downs coal project – The Australian

South32 Ltd. may sell its 50% stake in the Eagle Downs metallurgical coal joint venture with China Baowu Steel Group Corp. Ltd. unit Aquila Resources Pty. Ltd. in Queensland, Australia, after South32 considered the results of a feasibility study, The Australian reported Jan. 11.

In September 2018, South32 closed its purchase of the project stake from Vale SA after paying US$106 million up front and agreeing to US$27 million in deferred payments. Aquila had estimated that about A$1.5 billion would be needed to complete the development of the project.

South32 CEO Graham Kerr had previously flagged the company's declining interest in the project, citing its unattractive returns. But he said the company would make a final decision in early 2021.

"My indication was that in the short term the met coal price is under some pressure, some other projects are getting built, the returns I've initially seen don't super-excite us — but there’s still time for that to be finalized. I’m slightly pessimistic but if the team can demonstrate it generates the kind of returns we’re looking for, we'll look at it,” Kerr was quoted as saying.

A feasibility study on Eagle Downs outlined average production of 5.2 million tonnes of low volatile hard coking coal from an underground mine at an average operating cost of about A$71 per tonne, the report said, citing China Baowu's website.

China Baowu reportedly remains interested in developing Eagle Downs, although it was not clear if it would buy South32's stake.