Company Interview / First coal milestone

Key points:

Ayten Saridas announces Australia's first coal production from the Dartbrook mineThe mine's unique existing infrastructure significantly reduces restart costsMarketing agreements with Vitol secure access to key international markets

Australia Pacific Coal (ASX: AQC) has hit a major milestone with the first coal production from the re-opened Dartbrook mine. Ayten Saridas highlights the unique infrastructure and strong coal prices as key motivators for the restart. The mine supports domestic and international demand.

Despite coal's political landscape, Ayten sees an opportunity in the pre-existing infrastructure and mining lease. With successful modifications and de-risking, the focus is now on steady state production to meet both domestic and international market needs. The underground nature of the mine sets it apart.

The restart cost is $100 million AUD, significantly lower than replicating the infrastructure. Australia Pacific Coal owns 80% of the mine, with Tetra as a joint venture partner at 20%. Marketing agreements with Vitol ensure quick access to key customers, particularly in Japan and Korea.

Full unedited transcript:

0:11

Well, let's dig into an ASX listed smallcap announcement. And Australia Pacific Coal has announced a major milestone in its first coal production from the re-opened dart Brook mine.

0:24

Agent Sarita is the chief executive and the managing director of Australian Pacific Coal, and she joins us now. Adrian, good to have you on the show. Thanks for joining us.

0:33

This. This mine has been in care and maintenance for a number of years. Why have you brought it out of that?

0:40

Uh, why? Because it's a good asset. And if you saw the infrastructure that we own, it is an infrastructure that no one would really, in their right mind in this day, would rebuild that infrastructure. It's an underground coal mine. The resources are there. Uh, and it was a very low capital restart program. So why we put it back into production. Simply put, coal prices are strong. The world still needs coal and it still needs a good quality thermal coal. And it makes good economic sense that we can support not only the domestic demand, but also the international demand for coal. And that's why we have brought it back to life. What I would say is, I'm not sure why it stayed in care and maintenance as long as it has. It's actually a very unique asset, and we're very proud that we've brought it to this stage. Well, no doubt weighing on

1:40

investor minds at least, has been coal itself, which has become very political, of course. But you're clearly seeing an opportunity there because longer term, at the moment, we're not seeing, as you mentioned, any new mines being commissioned. So you're obviously taking that opportunity then.

2:00

Absolutely. This is not a greenfield site. It, uh, it was. The infrastructure was already there. We already had, uh, mining lease over the tenements, and we needed to, uh, submit a couple of years ago, uh, modification to our mining plans. And we did that successfully. The next stage really for us is we've got the funding in place. Uh, we have de-risked the mine substantially. And now that we've got the core equipment, um, commissioned, it's really about getting into steady state, uh, production. And from there, we will be able to supply the domestic market, but more importantly, into the international market. So we're quite excited about this. This was not the easiest asset to de-risk. It has uh, it's an underground coal mine, which is unusual in New South Wales, particularly in the Hunter Valley,

3:00

because a lot of them are open cut. So to have an underground coal mine sets it apart from the rest anyway, uh, disregarding ESG concerns. What we want to show here is that mining and agriculture can coexist. Uh, the infrastructure that was put in place by Shell and Anglo many, many years ago was built to last. And it is going to be a world class asset. The reserves are there. And uh, from a geological point of view where mining the same seems that everybody else is. So there's nothing risky about it other than the fact that, you know, we had a tunnel full of water. We successfully did watered that last year.

3:43

The rest of it, I guess, is getting it into production. And there's still a strong demand for coal. And that's really what we're playing into. So what are the costs involved there? What sort of CapEx are you looking at? And I gather you also you're not doing this just yourselves. You've got a joint venture partner. Correct. So the cost of restarting this mine is in the order of, let's just say, $100 million Aussie, uh, which is very low when you think about it, if you had to replicate the infrastructure, you're probably talking 1 to $2 billion. We've got 80% of the mine. We own 80% of the mine. And tetra, who is the operator, owns 20% of the mine. And, you know, we bring, uh,

4:28

quality skills on both sides of the fence to the table. And we've been working very closely together, and we're very proud of the work that they have achieved on the ground. And, you know, we've got a very good team on the ground who are very successful in their own right, and they've done a remarkable job in getting us to this point.

4:49

Do you have offtake agreements in place?

4:53

We have a marketing agreement with Vitol. They are one of the largest marketers in the world. They have access to the key customers. So our small volume that were originally initially going to have, they will find a home for it very quickly. But the quality of the coal we're talking about here is what they refer to as Newcastle spec. It's premium thermal coal, and the biggest customers for that quality of coal is out of Japan and Korea. And we know that it can, you know, supply that uh, market and vital as our major uh, and our main, uh, marketing agent, we are very confident that they'll do a fantastic job in getting this to the markets that need it. So and what's the what's the timeline here in getting up to full production and actually, um, starting with those exports.

5:47

So we've recommissioned the equipment, mainly the conveyor equipment. I'd say within the next 4 to 6 weeks maximum, we will be in production. Uh, we will be selling unwashed coal to the market initially, initially. But I would say, given that we've already a few, uh, months into this financial year, uh, full production will probably be the following year, but we're targeting 2.7 7 million tonnes of rom coal per annum out of this mine and in terms of transporting the coal, do you have agreements in place?

6:23

We are very close to signing an agreement in place. Uh, there is a lot of capacity in the Newcastle market. We have the rail infrastructure already in place, so we're very close to making those announcements. It's imminent. It's the best way I can describe it. And given those costs, those upfront costs, obviously getting this restarted and into full production. Are you anticipating, uh, any, uh, well, in terms of funding, will you have to go to the market at all?

6:53

Look, the $60 million of US dollars to fund the restart capital has already been sourced from Vitol. We will need some working capital. And again, uh, we are near finalizing that. And it will be a combination of, uh, sources of capital that we will be pulling together. But again, I can't say anything more about that. But an announcement is imminent.