Blair Athol coal mine may soon be sold to mining industry minnow TerraCom.
Blair Athol coal mine may soon be sold to mining industry minnow TerraCom. Contributed

Special report: Changing landscape of the Bowen Basin

THE window for "dollar dazzler" mine purchases could be closing, but the dual $1 sales put in motion in the past 18 months are setting the tone for the changing fabric of the Bowen Basin.

While the mining sector bust saw many multinational mining companies opting to divest assets, more nimble operators have leapt at the chance to fill the void.

Entering the sector at the bottom of the cycle, they will be hoping to ride it through to the top before considering an offload.

Leading the transformation was Stanmore Coal, which bought the Isaac Plains coal mine for $1 in 2015 from Vale and Sumitomo. After opening in May, it posted $12.7m in revenue last month.

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TerraCom looks likely to follow suit, if the State Government approves its proposed purchase of Rio Tinto's Blair Athol coal mine, also for $1.

But Stanmore Coal's Nick Jorss, who this week transitioned from the managing director to deputy chairman, said the window of opportunity for pocket-change purchases may be closing, following the rapid coal price rise the past few months.


Managing director Nick Jorss explains the operation to Premier Annastacia Palaszczuk. Photo: Emily Smith
Managing director Nick Jorss talks to Premier Annastacia Palaszczuk at the reopening of the Isaac Plains coal mine in May.

"I suppose the question is now with the prices shooting up so quickly whether that window will close or not," he said.

But that wasn't to say the chance for junior companies to succeed in the Bowen Basin had closed.

In fact, Mr Jorss' transition to deputy chairman this week was geared at putting him in a position to scout out new acquisitions for the company. While he didn't state if he had eyes on any new mine in particular, he confirmed the focus would be entirely on the Bowen Basin. "It's the best place to be for high quality metallurgical coal," Mr Jorss said. But just as the company "had to kiss a lot of frogs" before settling on the Isaac Plains project, any new acquisition would first need to tick the right boxes.

What set Isaac Plains apart was the potential to introduce a new mine model, which saw the cost of production cut by 35% per tonne of coal.


Stamore Coal's managing director Nick Jorss at the Isaac Plains coal mine yesterday. Photo: Emily Smith
CHANGING FABRIC: The Stanmore Coal mine success story in purchasing and reopening Isaac Plains during the mining downturn is one other small companies are looking to emulate.

It also provided the chance to expand into the adjacent Isaac Plains East, as well as underground.

TerraCom looks likely to emulate the success story of Isaac Plains, after it secured Foreign Investment Review Board approval for its planned purchase of Rio Tinto's Blair Athol coal mine this week. The last approval it needs to secure is from the state government.

These two projects appear to share a number of key advantages.

Just as Stanmore Coal acquired $350m worth of infrastructure through its $1 purchase, TerraCom believed the infrastructure it would secure and management plans already devised could see it reopen Blair Athol by December.

Each company had also set out with plans to operate at far less capacity than previous owners.

At Isaac Plains' peak it produced 2.8m tonnes of coal a year, however the Stanmore Coal model is on track to produce 1.1m tonnes this financial year, although Mr Jorss said climbing prices could see it ramp up production to 1.5m/t.

While Rio Tinto's peak production at Blair Athol was in 2009 with 11.3m tonnes exported, TerraCom would significantly reduce the tonnages, with 2m tonnes planned to be produced in the first year.

However further details about their operating structure have not yet been revealed.

"My thinking on the market is out of adversity comes opportunity. When some of the big guys are struggling to make their business models work that provides some good opportunities for smaller guys like us who can be a little bit more nimble and with a lower cost base to come in and make a success of something," he said.

Who are the juniors?

  • Stanmore Coal purchased Isaac Plains coal mine from Vale and Sumitomo in 2015 for $1. It's looking for "further opportunities" in the Bowen Basin.
  • Taurus Fund Management purchased a major stake in Foxleigh coal mine from Anglo American this year. Speculation is mounting it may soon switch to a labour hire workforce.
  • TerraCom has pans to purchase Blair Athol coal mine from Rio Tinto for $1, subject to state government approval. It also has a number of exploration tenements.
  • Australian Pacific Coal has plans to purchase the Dartbrook mine from Anglo American. It may also look to the Bowen Basin for opportunities.
  • Batchfire Resources plans to purchase the Callide thermal coal mine from Anglo American.

Rural headquarters are symbolic of industry transition

Days after announcing plans to purchase the Blair Athol coal mine, TerraCom was under fire as its "lean corporate structure" was revealed - it's headquarters is a small cottage in rural New South Wales.

While the company quickly issued an ASX statement titled "TerraCom Refutes Claims" against the notion it may not have the financial backing to take on one of Queensland's oldest coal mines, its humble headquarters is symbolic of a new wave of industry that is buying into the Bowen Basin.

As the mining bust saw multinationals, like Rio Tinto, Anglo American and Vale looking to divest less profitable assets, smaller companies stepped in to operate the mines with lower corporate overheads, and at a lower cost.

"Our offices are not luxurious, but are clean, efficient and cost effective due to the company responsibly minimising overheads during this slow market cycle," the ASX statement read.

Although a theme of doom and gloom has radiated from the region the past two years, Resource Industry Network chairman Tony Caruso believes that behind the scenes the Bowen Basin has become a hub of activity.


Resource Industry Network chairman Tony Caruso. Photo Emily Smith / Daily Mercury
Resource Industry Network chairman Tony Caruso believes more change is coming. Emily Smith

"Mines (are) in various stages of being bought and sold. We're going to see a very different landscape in the Bowen Basin, with less big miners and more small private operators," Mr Caruso said.

"The upshot for this region is there's going to be money spent on these operations."

During the bust many companies were forced to wind back operations, and many required maintenance and servicing. As smaller companies tended to use contractors or run the business on site, it would give more scope to invest, restart and upgrade, providing flow-on opportunities for METS sector businesses.

The spike in coal prices, which had passed US$200 a tonne, would only fuel the urgency of these transactions, Mr Caruso believed. "If you're the buyer of a mine, you don't want the prices to keep going up," he said. "You want to get it at the bottom of the cycle."

Multinationals opt to divest

FIVE Anglo American mines remain on the market, as sale completion processes are finalised on two others, following the mining giant's plans to reduce its coal operations.

Dawson, Moranbah North and Grosvenor in the Bowen Basin all remain up for sale, along with NSW's Drayton and Drayton south.

Callide is likely to soon be sold to Batchfield Resources while Dartbrook will go to Australian Pacific Coal. However it's not the only major corporation looking to divest. After filing for chapter 11 bankruptcy in the US, Peabody released a plan to reduce its coking coal production in Australia in the next five years.

This has been tipped to occur through closures or sales. Rio Tinto is willing to hand over $80m cash to the State Government, to eventually rehabilitate Blair Athol, and accept $1 from TerraCom for the transaction.