Queensland’s Bluff coal mine returns from mothballs as MACA agrees deal to sell

With coal prices soaring, the failed Bluff mine in Queensland could soon be back up and running.

The Bluff coal mine was put into recievership as coking coal prices fell below $US100 a tonne, which has since soared to around $US399. Picture: Ian Waldie/Bloomberg

The resurgent coal price could see the return of the failed Bluff mine in Queensland to production, with mining services company MACA offloading it to ASX-listed Bowen Coking Coal.

Tumbling prices pushed the mine’s owner, Chinese-owned Carabella Resources, into receivership in November 2020 over $34.7m worth of unpaid bills to MACA, after the mine was mothballed a month before.

MACA said on Tuesday it had signed a binding agreement to sell the mine to Bowen Coking coal for $5m upfront, in cash or script, and a sliding scale of production royalties.

Bowen will pay $2 a tonne on coal sold above $US120m, to a $10m cap. It will pay $5 a tonne on sales above $US150 a tonne and another $5 on sales above $US200 a tonne — both uncapped.

The mine produces pulverised coal for injection in blast furnaces — an intermediary product that fetches less than the high quality hard coking coal that makes up the most valuable Queensland coal exports.

But soaring coal prices have lifted the value of all Australian coal exports, and MACA said all three tiers of royalties would be payable at current prices if the mine were exporting coal today, with Bowen noting that PCI coal was currently trading at $US276 a tonne.

MACA said it expected to complete the sale of the mine before the end of the year.

Bowen said that Bluff was fully permitted to return to production, with a restart of the mine likely to cost $5m to $7m.

The company said it hopes to be able to return Bluff to production in early 2022, when it agrees to debt funding for the restart and completes negotiations over port and rail access.

MACA said it is still trying to sell Carabella’s other projects, including the undeveloped Grosvenor West hard coking coal project.

Carabella was bought in 2014 for about $70m by China’s Wealth Mining, a subsidiary of privately owned China Kingho Energy Group. Bluff entered the market in 2019.

The company went under as metallurgical prices fell below $US100 a tonne for the first time since July 2016, as China’s bans on Australian metallurgical coal imports forced a reshaping of the seaborne trade.

But those bans are now biting heavily in China, and coking coal prices soaring on supply shortages and heavy demand.

Citi analysts noted that premium Australian coking coal was selling for $US399 a tonne at the port late last week, and for $US615.25 a tonne landed in China.

MACA shares were up 0.5c to 79c in early trading. Bowen shares last changed hands for 19c.