Baker Steel Resources acquires royalty stake in Wilton and Fairhill future production for A$6m

Baker Steel Resources Trust acquired a 0.75% gross royalty revenue stake over the future production of coal from the Wilton and Fairhill properties in Queensland, Australia for A$6m.

The agreement also included the option for the Baker Steel to acquire an additional 0.25% GRR for a further A$2m, exercisable by the company at any time up to 45 days following the production of 2m tonnes of saleable coal from the properties.

At consensus long term average prices for metallurgical and thermal coal, the royalties - assuming the option is exercised and therefore a 1% GRR - were anticipated to generate around A$3.5m per year for the company before tax.

The Wilton and Fairhill properties contained 'significant' JORC resources of 2.6bn tonnes of coal, of which 738m tonnes are less than 100m below surface.

Production from Wilton was expected to commence mid-2019, with first royalty payments made to the company on a quarterly basis thereafter.

Fairhill production was scheduled to commence in 2020 and then aggregate coal production would ramp-up to a targeted sustainable level of 2.5m tonnes of coal per annum of saleable processed coal by 2021/2 for at least 25 years, the company said.

Baker Steel's acquisition of the royalties was in line with its strategy to add attractive investments to its portfolio, which can also generate meaningful income supportive of the returns policy to shareholders, the company added.