Miner plans to expand in 2018
Wednesday 01 February 2017
Stanmore Coal is pushing ahead with above and below ground expansion plans in Central Queensland despite some disappointing production results in 2016.
Their biggest expansion proposal is to develop the Isaac Plains East tenements (formerly known as Wotonga) which they purchased in 2015 from Peabody for around $7 million.
The IPE deposit is more or less adjacent to the existing mining operations at Isaac Plains, so in theory, they should be able to exploit the resource using their existing mining fleet and infrastructure.
However, they still have to negotiate access with affected landholders to fulfil that objective - which history has shown can be an unknowable delay.
Nonetheless, the company says it hopes to have first coal in 2018.
“The project schedule from an approvals perspective [for Isaac Plains East] is in a crucial phase,” Company Secretary Andrew Roach said.
“From January 2017 through May 2017, resolution of key negotiations with landholders and overlapping tenure parties must be reached in parallel with the public notification process managed through government departments.
“Pending the outcome of these processes, if successful, the mining leases and associated environmental authorities may be granted in the first quarter of 2018, and following approval, the company expects the first production in the third quarter of 2018.”
If everything goes to plan for the Isaac Plains East initiative, the company says it will then push ahead with underground development plans. In this scenario, the company will seek to expand coal production at the existing Isaac Plains mine through a board and pillar mining operation.
This would deliver increased production beyond 2018 - the year widely expected to be when the current global stockpile of coal is used up.
The last twelve months have been a mixed bag for Stanmore.
On the one hand, rising coal prices helped drive their shares from lows of $0.15 to highs of $0.82 in October (+500%).
On the other hand, their failure to reach production targets meant they were unable to sell roughly half the coal produced in the December quarter at the peak December prices because they were still fulfilling contracts set at lower prices earlier in the year.
The company even went into a trading halt in December when they sought to raise $15 million to fund increased development work associated with a revised mining plan which will allow them to access lower cost coal.
All this has contributed to their share price falling roughly 40 percent since October.
However, Stanmore believes the extra investment in development work funded by the capital raising late last year will bear fruit when strip ratios for target coals will temporarily fall by around a third in 2018, which they hope will allow them better profits in the short term.
Stanmore’s March quarter coal benchmark price of $US171 a tonne is up more than a third higher than where it was in December, giving them a theoretical cash margin of just under $A120 a tonne (at today's exchange rate), based on their production costs in December of $A110 a tonne.
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