Bowen Coking Coal Ltd. agreed to buy Cape Coal Pty. Ltd.'s 100% acquisition right over the Hillalong East coking coal project owned by Rio Tinto Exploration Pty. Ltd.
Hillalong East is near the company's Mount Hillalong project in Queensland, Australia.
Bowen will issue Cape Coal 30 million common shares and reimburse about A$50,000 in direct legal expenses, according to a Feb. 15 release. The share issue will increase Cape Coal's holding in Bowen to 100.0 million shares.
The deal is expected to complete before the end of April.
To acquire the Hillalong East project from Rio Tinto Exploration, the company will need to pay A$1.1 million.
Rio Tinto Exploration will also receive a royalty of 1.25% of gross freight-on-board revenue from all coal sold from the tenements.
Rio Tinto Exploration holds the right to buy back 51% of the project at fair market value on completion of a pre-feasibility study or a feasibility study, in which case a joint venture will be formed and its right to receive the royalty will terminate.