Bowen Coking Coal Ltd. said May 21 that it will sell its Comet Ridge coal project in Queensland, Australia, to Springsure Creek Coal Pty. Ltd.

Springsure Creek is required to pay A$100,000 in cash and grant a royalty stream of 1.25% of free on rail revenue from the first 2.8 million tonnes of coal produced from the project.

The company will have the right to terminate the royalty in return for a A$3 million cash payment to Bowen for a four-year period after achieving certain milestones.

At the end of the period, if Springsure Creek has not exercised the royalty buyout, Bowen can repurchase the Comet Ridge project for an amount equal to the capitalized exploration costs. Springsure Creek will also grant the company priority access to its rail infrastructure for the purposes of loading up to 350,000 tonnes per annum of coal.

Additionally, Bowen will hold an option to buy 100% of the coal produced from Comet Ridge on an annual basis.

Springsure Creek will take over all costs and liabilities associated with Comet Ridge and will continue proceedings in the land court. The transaction is subject to entering formal documentation as well as securing shareholder approvals.

Bowen said funds available for Comet Ridge will be redirected to the company's other projects. The company's development program will remain focused in the short to medium term on its Cooroorah and Hillalong coal projects in Queensland following the recent acquisition of the Hillalong East tenement from Rio Tinto.