Global mining company Anglo American has secured its board approval for the development of the Aquila project in Queensland, Australia.

With an estimated capital cost of $226m, the project will see the extension of the life of Anglo American’s existing Capcoal underground operations by six years to 2028.

The Capcoal mining complex includes the Capcoal open cut and Grasstree underground operations, which are managed by Anglo American.

Anglo American owns 70% of the underground operations, while the remaining 30% is owned by Mitsui.

Development at the mine is expected to start in September this year, with first longwall production of hard coking coal in early 2022.

Anglo American Bulk Commodities CEO Seamus French said: “Aquila offers us a high margin six-year life extension to our Grasstree mine, with an average annual saleable production of 3.5 million tonnes (attributable) of premium quality hard coking coal at a real, post-tax IRR of more than 30%, and an EBITDA margin of 40% at consensus long term prices.

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“The project benefits from low capital intensity as we can use the existing infrastructure and systems from our adjacent Grasstree mine that is coming towards the end of its economic life, as well as providing continuity of employment for our workforce.”

According to Anglo American, the Capcoal open-cut produced two million tonnes of metallurgical coal products and Grasstree underground produced 3.6 million tonnes of hard coking coal, last year.

As of 31 December last year, the Capcoal open-cut operations have a reserve life of 20 years.

In a separate statement, the company announced its plans to return up to $1bn to its shareholders through a non-discretionary share buyback programme.

The programme, which mainly serves the purpose of reducing the issued share capital of Anglo American, will start immediately and is expected to end before March next year.