The consideration comprises an upfront payment of approximately $106 million, a deferred payment of $27 million due three years after completion and a coal price linked production royalty that will also be payable and is capped at $80 million.

South32 CEO Graham Kerr said, “The acquisition of Eagle Downs embeds another attractive development option within our growing portfolio, with the upfront payment representing a minor premium to the historical infrastructure spend reflecting our move to operating control.”

“We are pleased to be able to further strengthen our long-standing relationship with BaoWu and look forward to working with Aquila to commence the final feasibility study to optimize the mine design and development.”

Subject to the findings of the feasibility study, South32 and Aquila plan to construct a multiseam underground longwall metallurgical coal mine and processing plant with a dedicated rail spur and train loadout facility.

Eagle Downs was placed under care and maintenance in late 2015 having benefitted from initial investment that delivered site infrastructure, including water supply and high-voltage systems, office buildings and water and sediment dams. A set of dual 2-km drifts are also approximately 40% complete.