Stanmore inks deal with Anglo American and Exxaro to explore and mine area close to Isaac South project

Stanmore Resources Ltd (ASX:SMR) has signed a deal with Anglo American and Exxaro enabling it to progress exploration and mining work in a territory adjacent to its Isaac South coal project in Queensland, potentially boosting the latter’s economics.

The binding and definitive agreement between the three companies relates to a Designated Area within tenements held by Anglo American and Exxaro as part of their Moranbah South joint venture.

The area happens to be immediately adjacent to Stanmore’s 52 million-tonne Isaac South project, and the company is seeking the opportunity to explore and study it, with plans to apply for a mining lease to mine the open cut Rangal measures there.

Given the low strip ratio of the Designated Area, its addition to the Isaac South project area is anticipated to boost economics and extend the life of operations beyond the currently mined Isaac Downs pits.

The transaction is to be completed through an upfront consideration of US$15 million to be paid today, with deferred consideration of US$20 million upon first coal being mined or approximately 10 years from grant of a mining lease, and a capped US$40 million contingent royalty linked to certain coal price thresholds being met.

CEO Marcelo Matos said the agreement opened the door to improving metrics for Isaac South.

“This transaction paves the way for the development of our Isaac South project in a more competitive and lower average strip ratio basis, as a natural capital efficient brownfield extension of our current Isaac Downs mine, prolonging the overall mine life at our Isaac Plains Complex,” he said.

Stanmore shares fell on the news, and at 15:39 AEST, they were trading at $2.75 – a fall of 4.36% since the market opened.