Australian mining firm Pembroke Resources is on track to start shipping from the Olive Downs coking coal project in Queensland's Bowen basin in 2022, with a gradual ramp up to 15mn t/yr, after it was granted mining leases allowing construction to begin on the project.

The Queensland government announced today that construction of the mine could start immediately that the mining leases have been granted, but insiders suggest that it is unlikely to begin before next year, with negotiations over offtake agreements and financing delayed by Covid-19. Construction is expected to take 12-18 months depending on weather interruptions, with first coal in 2022.

The first stage of the project is for a 6mn t/yr mine, doubling to 12mn t/yr in the second stage before rising to 15mn t/yr in a third stage.

The project's backers believe that debt financing will be secured despite weak coking coal prices and the prospect of the development of clean steel technologies that could replace coal in the process over the longer term.

"For metallurgical coal projects like this, there is the debt capacity out there in the market, because realistically good quality coking coal is still needed to manufacture steel to build wind turbines and solar farms," Denham Capital director Bert Koth said. US private equity firm Denham owns Olive Downs through its subsidiary Pembroke Resources.

Olive Downs will produce a hard coking coal that is just below the quality of premium hard coals, where demand is expected to concentrate as steelmakers move to reduce pollution and cut carbon emissions.

Argus last assessed premium hard low-vol coking coal at $135.80/t fob Australia yesterday, up from a recent low of $105/t on 11 August but down from $163/t in mid-March. It assessed hard mid-vol coking coal at $114/t fob Australia on 28 September, up from $85.30/t on 28 August but down from $144/t on 16 March.

Olive Downs has a 19km rail spur to connect to the Norwich Park branch railway, which connects to the Goonyella rail system where the coal will be hauled to the 85mn t/yr Dalrymple Bay Coal Terminal (DBCT) at the port of Hay in central Queensland. Pembroke has enough capacity allocated at DBCT for the first stage and there is plenty of spare port capacity in Queensland.

Olive Downs has 838mn t of coal resources and 514mn t of coal reserves.

This article is reproduced at agusmedia.com