Stanmore Coal has reached an agreement to acquire the Wotonga South coking coal deposit, located within mineral development lease (MDL) 137, and an additional exploration permit for coal (EPC 728) in Queensland from Peabody Australia’s subsidiary Millennium Coal.

The proposed $30m acquisition of the MDL 137 and EPC 728 tenements will allow Stanmore to develop an open cut mining operation with the potential to extract 15-20 million tonnes of coal, extending the life of the company’s Isaac Plains Complex.

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The company will include the coal in its new Isaac Plains South project, which is being developed south of the existing complex.

“With this acquisition, Stanmore can cement its ‘capital light’ approach utilising our regional advantage and infrastructure.”

Stanmore intends to combine the new tenements with EPC 755, which holds potential coal resources in addition to those at Wotonga South.

Stanmore Coal managing director Dan Clifford said: “With the acquisition and permitting of Isaac Plains East and now the acquisition of Wotonga South, Stanmore can cement its ‘capital light’ approach utilising our regional advantage and infrastructure.

“With this significant step taken, and the bankable feasibility study underway for the Isaac Plains Underground, the company has a clear pathway for the full utilisation of the circa $350m replacement value infrastructure at Isaac Plains acquired by the company in 2015 and supports a significant improvement in EBITDA and cash flow from operations for the company over the next 15-year period.”

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Under the terms of the agreement, Stanmore will pay $6m at completion of the deal in July this year and make the remaining payments in multiple tranches over the following 12 months.

The company is also required to pay a production-based royalty that is capped at around $10m.

Located 10km south of the existing coal handling and preparation plant (CHPP) at Isaac Plains, the Wotonga South deposit is estimated to have a coal resource of 22.8 million tonnes, with a mine life of eight to ten years.

The deposit is expected to produce semi-hard coking coal, as well as a range of semi-soft/weak coking coals.

The transaction is conditional upon receipt of Foreign Investment Review Board (FIRB) approval and fulfilment of other customary conditions.