Rio Tinto is a step closer to completing its three-year mission to sell the Blair Athol thermal coal mine in Queensland.
Rio and its minority partners agreed to sell the mine, which has been shuttered since 2012, for $1 to a company led by Rio's former top executive in Mongolia, Cameron McRae.
Mr Mcrae is now chairman of ASX-listed microcap Terracom, which announced plans to buy Blair Athol in July and moved closer on Friday when it signed a binding sale agreement. The deal now requires approval from the Queensland government and the Foreign Investment Review Board (FIRB) to go ahead.
After announcing two previous sales of Blair Athol that failed to execute, Rio will be hoping the mine is finally taken off its hands this time. Rio and its minority partners in Blair Athol will pay $80 million to Terracom to cover the rehabilitation obligations, and it is understood that money will be placed in a bank account controlled by the Queensland government.
Terracom has vowed to conduct rehabilitation work while it works to resume production at the mine. It believes it can resume production before the end of 2016, and eventually produce 2 million tonnes of coal per year.
End of 2016 goal
The deal continues a trend that has seen little-known microcaps buy the Australian coal mines that the big multinational miners no longer want.
Thermal coal prices have surged by almost 50 per cent since January and the benchmark product from the Hunter Valley was fetching $US72.50 ($94.95) per tonne this week.
Rio first tried to sell Blair Athol to Linc Energy in 2012, but the sale agreement was never formalised.
A second attempt to sell the mine to a group called "United Mining" also failed to reach completion.
Rio said the third attempt to sell the mine was expected to close by the end of this year.
"The sale is expected to close by the end of 2016, subject to certain conditions precedent being met and approval from the Queensland government," the company said. "TerraCom has expressed a strong desire to recommence production at Blair Athol and this agreement offers them a unique opportunity to own and operate an established coal asset, supplementing their other coal projects in the region."
Rio owns 71.2 per cent of Blair Athol, with Japanese firms J-Power, Japan Coal Development and a superannuation fund owning the balance.
Mr Mcrae was a director of the joint venture that owns Blair Athol in the early 2000s but he stressed that Terracom was already in talks with Rio when he joined the company as chairman.
"But I was certainly excited that the opportunity was there and I knew it had some more life under a smaller company structure with lower overheads and lower mine throughput," he said.
Terracom shares were fetching 0.3¢ on May 13 but have risen to be fetching 3.7¢ during morning trade on Friday.
