South32’s Eagle Downs partner Baowu tests interest
As BHP’s auction for Daunia and Blackwater gets to the pointy end, owners of other coal assets in the M&A pipeline are starting to get their ducks in a row.
Eagle Downs has been a tough asset to sell for South32. Robert Rough
Street Talk understands Chinese steel giant Baowu has begun doing the rounds in Perth to gauge appetite for its 50 per cent stake in Queensland’s Eagle Downs coking coal mine. It’s early days, with no advisers appointed yet.
Sources said the talks were informal at this stage, but there was a possibility that Baowu and South32 would appoint sell-side advisers down the line.
The project will not be an easy sell, given the ASX-listed miner has been trying to offload its half of Eagle Downs for nearly two years without success. It’s a development asset – instead of a producing one – and South32’s initial attempts to sell it were complicated by how long-standing (and expensive) contracts would be split among partners.
Baowu landed at Eagles Down in 2014 after a take-private of ASX-listed Aquila Resources. And it’s looking to check out after settling expensive port contracts for nearly $300 million, as revealed by the Australian Financial Review on September 13.
It paid nearly $300 million to annul a costly port contract with the Wiggins Island Coal Export Terminal (WICET) under which it had been forced to pay for port and rail capacity it has never used. The contracts were signed by Aquila in 2011, with rosy expectations of building a large coal export business from Eagle Downs.
Had it not sought a way out of the WICET contract, Aquila and its partners would have had to pay another $375.9 million over the remaining life of the contract, the AFR then reported. Aquila had already spent $257.5 million on
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