Macarthur Coal looks set to increase its first-half profit by $40 million, as a result of an option exercised by Gloucester Coal to increase its stake in the Middlemount mine.
The 20 per cent increase by Gloucester will increase dividends for Macarthur shareholders, with the miner saying its net profit for the first half is expected to be between $138 million and $143 million.
Because last month was unchanged, the company’s operating profit guidance is between $97 million and $102 million.
The proceeds of the Middlemount sale and the reversal of hedging liabilities associated with the implementation of the option has resulted in the boost to net profit.
Macarthur’s stake in the mine is down to 50 per cent.
Just under half of the project – 48 per cent – is now owned by Gloucester, who bought Macarthur’s stake for $97.6 million.
This was a discounted figure from the $108 million previously agreed on previously under an option arrangement, because the transfer happened prior to a specified project milestone and two years earlier than the expiry of the option period for the transaction.
Macarthur also released its first reserve statement for the Codrilla deposit in the Bowen Basin yesterday, which is 85 per cent owned by the Brisbane-based miner and has 50 million tonnes of proved and probable coal reserves, according to Macarthur.
The remaining 15 per cent is owned by China’s CITIC.
The Codrilla is competing with the Willunga project, to be Macarthur’s fourth mine and a decision on developing one of the mines has yet to be made, despite being targeted for the end of last year.
“Evaluations of these projects are still progressing,” Macarthur said.
It went on to sat the Codrilla mine, located 50 kilometres from the town of Nebo, could be developed as an open cut mine with the capability to produce 3.2 million tonnes per year of low volatile pulverised injection coal a year for up to 14 years.
Previously, Macarthur has discussed the possibility of mining underground.
Macarthur’s goal to mine from Codrilla in 2013 would make it a key component of the company’s hopes to increase production from its current 5 million tonnes a year to 9.5 million tonnes in 2014.
A Macarthur spokesperson said a decision has not been made on which mine will go proceed first, but following yesterday’s reserve announcement, many are predicting it will be the Codrilla.
Public forums were held last month on Codrilla and the company has detailed the meetings on their website.
Macarthur will report its first-half earnings on 24 February.
Image: The Middlemount mine, macarthurcoal.com.au