The deal is a huge step-change for Stanmore which famously bought the Isaac Plains mine from Vale and Sumitomo in 2015 for $1 and earlier this year bought Mavis and Millenium Downs mines from Peabody.

Stanmore chief executive Marcelo Matos said it was an exciting and transformative acquisition for the company and had the support of its majority shareholder, Singapore’s Global Energy and Resources.

He said the transacti0n would mean the company would become one of the leading metallurgical coal producers globally and provide Stanmore with a portfolio of tier one assets, with a significantly increased reserves and resources base and assets with an expected mine life exceeding 25 years production.

The market has jumped on the deal and lifted Stanmore shares 17 per cent this morning.

For BHP, the deal means it can offload mines that don’t have the same quality as its BMA joint venture and would mean the BMC assets would not have to compete against them for capital.

The deal will give Stanmore the South Walker Creek PCI mine and the Poitrel mine which produces coking coal and PCI coal. They have a combined production of 10 million tonnes a year and total marketable resources more that 135 million tonnes. It also will get the undeveloped Wards Well coal project.

BMC had an EBITDA of $US217 million for the September year.

Stanmore said the deal was based on an upfront payment of $US1.2 billion with a potential follow-up payment of $US150 million, which is dependent on the coal price exceeding targets.

It will pay for the asset with a mix of debt and equity. It intends to carry out a partially underwritten pro-rate accelerated, renounceable entitlement offer to shareholders. However, no final decision had been made on the equity issue.

GEAR has made a commitment for up to $US300 million in any equity raising but has reserved the right to more in line with its shareholding level.

The acquisition would deliver to Stanmore a 5.6 times increase in production and a 4.2 times increased in marketable metallurgical coal reserves (on a 100 per cent basis). It also said there would be synergies to be achieved.

BHP president of Minerals Australia Edgar Basto said the transaction was consistent with BHP’s strategy and delivered value for the  company and shareholders and provided certainty for BMC’s workforce and the local community.

“As the world decarbonises, BHP is sharpening its focus on producing higher quality metallurgical coal sought after by global steelmakers to help increase efficiency and lower emissions,” Basto said.

“South Walker Creek and Poitrel are well-run assets that have been an important part of our portfolio for many years and we are grateful for their contribution to BHP.”

Elsewhere, the State Government has written to Fox Resources to express its concerns over a planned coal mine near Bundaberg

Resources Minister Scott Stewart said he had written to Fox Resources expressing my concerns about their application for a Mineral Development Licence (MDL 3040) in the Bundaberg region.

“These concerns included potential negative impacts of the proposed Mineral Development Licence based on its location, impacts on potentially affected landholders, concerns raised by local community groups in addition to the view raised by Member for Bundaberg Tom Smith, Member for Burnett Stephen Bennett and the Bundaberg Regional Council,” Stewart said.

“It is important to note that this is my preliminary view.

“Fox Resources now has the opportunity to provide a written submission in response to these concerns, before a final decision is made.”