Cleveland Cliffs invests in Queensland coal project for $109m

US-based iron ore pellet producer Cleveland Cliffs Inc will invest in a Queensland coal project, to be administered from its Perth office, after investing $109 million for the construction of a washplant and 8.3 per cent of the mining leases.

The full text of a company announcement is pasted below

Cleveland-Cliffs Inc today said that it has entered into a definitive sale and purchase agreement to invest in the Sonoma Coal Project in Queensland, Australia. The Company announced in January that its Board of Directors had approved the investment.

The Company agreed to binding terms with privately owned Australian coal company QCoal Pty Ltd ("QCoal") to invest approximately $109 million to construct a washplant and acquire mining assets and rights. Cliffs will operate and own 100 percent of the washplant and 8.3 percent of the mining leases, resulting in a 45 percent economic interest in the Project. Subject to granting of the mining lease, on which the washplant is to be located, closing is expected to occur before the end of the second quarter of 2007.

The Sonoma Project is expected initially to produce two million tonnes of marketable coal annually, beginning late in 2007. Production from Sonoma will include an approximately equal mix of hard coking coal and thermal coal. Plans call for annual production to increase to between three million and four million tonnes during 2008. The Sonoma Project has a current resource estimate of 107 million tonnes. The Cliffs Asia-Pacific business unit, located in Perth, Australia, will oversee Cleveland-Cliffs' interest in the project.

On the announcement, Cleveland-Cliffs President and Chief Executive Officer Joseph A. Carrabba said, "Our interest in the Australian Sonoma Project is integral to our strategy of expanding Cliffs' global presence. It diversifies our product offerings and provides Cliffs with another means of participating in the expanding Asian steel markets."