PERTH (miningweekly.com) – ASX-listed coal miner Cockatoo Coal has moved to take full ownership of the Baralaba coal joint venture (JV), in Queensland, after reaching an agreement with partner JS Baralaba Wonbindi (JSBW), a subsidiary of Japan’s JFE Shoji Trade Corporation.

JSBW has a 37.5% interest in Baralaba Coal and a 20% interest in Wonbindi Coal, which collectively make up the Baralaba JV.

Under the terms of the transaction, Cockatoo would acquire JSBW’s interest in the JV for A$1-million, along with JSBW’s existing loans, which totalled about A$60-million.

The repayment of the JSBW loans would be subordinated to any new funding contributed by Cockatoo up until the completion of the Baralaba expansion project, and would then be repaid from the JV cashflows after debt service on an equal dollar-per-dollar basis with the existing shareholder loans that Cockatoo has advanced to the JV.

Cockatoo recently completed the first phase of the Baralaba expansion project, which saw coal production increase to one-million tonnes a year at the Baralaba North operation. The company was now pushing to increase production to 3.5-million tonnes a year, and had submitted its environmental-impact statement to the Queensland authorities.

A 2013 bankable feasibility study estimated that a capital injection of A$311-million would be required to expand production to 3.5-million tonnes a year.

Meanwhile, as part of the transaction, the Baralaba JV would increase the current pulverised coal injection coal offtake tonnage with JFE Steel Corporation from 300 000 t/y to 500 000 t/y, and would extend the term of the offtake agreement until the end of March 2022.

JFE has advised that its decision to divest of its equity interest in the Baralaba JV was not a direct reflection of its view on the future potential of the project, but rather a result of current external market conditions, and the group’s decision to limit its exposure to coal investments.

“While we respect JFE Group’s decision to restructure its exposure to coal investments, we welcome their continued involvement through the increased and extended offtake agreement, and the longer term confidence in the project demonstrated by their decision to leave their existing loans in place and defer repayment,” said Cockatoo CEO Andrew Lawson.

He pointed out that the resolution of its discussions with JFE was a key step towards finalising the company’s ongoing discussions with major shareholders the Noble Group and SK Network, as well as its principal bank, regarding the release of up to A$37-million of restricted cash.

The company expected to finalise formal agreements for the release of the cash shortly.