Stemcor secures coal offtake in New Zealand

Stemcor, the world’s largest independent steel trader, has signed a Memorandum of Understanding (MoU) with Bathurst Resources (ASX & NZSX:BTU) for the sale of coal from the Buller Project in New Zealand. The hard coking coal produced from Buller will be of a premium quality and is in high demand as feedstock for steel and coke manufacturers around the world. 

The key aspects of the MoU are: 

• 5 year term from the commencement of first coal production (expected late 2011)
• Exclusive agency agreement for 45% of the first 1 million tonnes production plus 30% of any additional production above 1 mtpa
• Stemcor recognises the high quality nature of the Buller product and has agreed to have a proportion of its Agents commission driven by premiums above benchmark that they can obtain on product sales
• Stemcor to act as principal in certain markets
• Subject to satisfactory financial due diligence, agreement to provide up to US$50 million in a Coal Finance Facility; and
• Subject to formal documentation and completion of financial and operational due diligence to the satisfaction of Stemcor.

This partnership with Stemcor will offer Bathurst the best opportunity to maximise value for its product and to establish a track record for reliable, high quality coal production & sales on a global basis, without committing large quantities of the asset for lengthy periods of time.

Bathurst’s Managing Director, Mr Hamish Bohannan said:

“We are delighted to have reached this outcome with Stemcor. Stemcor is looking to expand the coal arm of its business and we are pleased that they have recognised the strong coking properties that our coal possesses. We have been working with them for a number of months and we are extremely confident in their experience, their people and their relationships in the global steel markets. We believe this offtake agreement will be a mutually beneficial and long term relationship for both parties.”

Stemcor Australia’s Managing Director, Stephen Baker said:

“This agreement marks an important step for Stemcor in the further development of our steel mill raw materials trade. We view Bathurst’s product as a very good fit for our steel and steelmaking raw materials focus and, as a niche product of high quality, it should be well received by our customer base in Asia. We have a good working relationship with the management at Bathurst and are excited about the future prospects for this project.”