Curragh mine owner Coronado Global Resources has firmed its financial position through a deal that will see thermal coal customer Stanwell Corporation provide up to $US150 million ($230 million) of near-term liquidity.

The agreement covers thermal coal supply of up to 800,000tpa to the Queensland power generator over a five-year period commencing in 2027.

The Stanwell deal comes hot on the heels of a $US150 million ABL refinancing, providing up to $US300 million (about $461 million) in additional liquidity to Coronado when combined.

Coronado said these agreements combined with ramp-ups at Mammoth in Queensland and Buchanan in the United States, along with $US100 million in cost-saving initiatives, were expected to materially improve the company’s position in the face of low metallurgical coal prices.

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“We believe this arrangement strikes the right balance between funding the company’s near-term requirements while protecting stakeholder interests at a time when our share price does not reflect the intrinsic value of the company,” Coronado chief executive officer Douglas Thompson said.

“Stanwell is a key business partner to Coronado, and we look forward to continuing our mutually beneficial long-term relationship.”

Long-time feed source for Stanwell

The Curragh mine, 14km north of Blackwater, has been supplying coal to Stanwell Power Station near Rockhampton for more than two decades.

It has been under Coronado’s ownership since 2018.

A Stanwell spokeswoman said the amendments to the existing coal supply agreement represented significant commercial benefit to Stanwell and the state of Queensland.

“As part of the new arrangements, Stanwell will supply Coronado with liquidity support in the form of a cash prepayment towards future coal supplies,” she said.

“The agreement also allows for the temporary deferral of coal rebate payments.

“The aggregate value of this liquidity support will be exchanged for an option for Stanwell to receive increased volumes of high-quality coal (at a cash discount) from approximately mid-2027.”

Curragh exports its metallurgical coal output to steelmakers throughout Asia, Europe and South America while its thermal coal is primarily sold domestically to Stanwell.

Under the terms of the 2018 New Coal Supply Agreement between Coronado and Stanwell, Stanwell’s entitlement to thermal coal at deeply discounted prices would have dropped from 3.5Mtpa to a maximum of 2.2Mpta in 2027.

Under the new arrangement announced today, Coronado will supply up to 800,000tpa of that 1.3Mtpa difference to Stanwell for the five-year period from 2027.

Of this, 400,000tpa will be fully exposed to the prevailing market price and 400,000tpa will be priced at a fixed forward curve that is higher than the current spot price.

Coronado expects this to result in significantly lower costs, improved margins and cash generation.