Coalworks holds to independence amid Whitehaven Coal rumour by: Robb M. Stewart From: The Wall Street Journal April 12, 2012 10:23AM Increase Text Size Decrease Text Size Print Email Share Add to Digg Add to del.icio.us Add to Facebook Add to Kwoff Add to Myspace Add to Newsvine What are these? COALWORKS is determined to maintain its independence as it progresses toward becoming a coal producer, despite speculation it could be pulled into Whitehaven Coal's web of consolidation.
The company’s focus after raising $17.4 million is on completing the bankable feasibility study for the Vickery South project in New South Wales, and a similar study next year for the Ferndale project, chairman Wayne Mitchell told Deal Journal Australia in a telephone interview from Hong Kong.
"The strategy of the company and of the board is on becoming an independent coal producer," he said, adding that Coalworks had secured investor support from Australia and abroad with a successful roadshow for the oversubscribed share placement.
Coalworks hasn’t been contacted by Whitehaven or mining magnate Nathan Tinkler’s Aston Resources since they unveiled plans to combine and create the largest coal producer in the Gunnedah Basin, NSW. Another vehicle owned by Mr Tinkler, Boardwalk Resources, is the largest shareholder of Coalworks and its presence on the register ignited speculation that it may also be a future M&A target.
Mr Mitchell plans to meet with Pitt Capital Partners later this month for an update on how Coalworks should develop its strategy in the wake of the Whitehaven-Aston alliance. The appointment of Pitt Capital, headed by New Hope chairman Robert Millner, as advisers was announced just days after that deal was done.
Mr Mitchell, who specialises in financing and project evaluation, said negotiations are under way on lining up debt funding for the coal projects. He declined to comment on the amount of debt the company plans to raise until the feasibility studies are completed, but said it’s likely to represent about 60 per cent of the capital cost of building the mines.
Although speculation Coalworks may be drawn into the $2.25 billion deal between Whitehaven and Aston is unlikely to fade completely, Coalworks did take a step toward asserting its independence by securing Asian commodities trading company Noble Group as a 9 per cent stakeholder through the share placement.
Still, Boardwalk looms large on the register with a 19.9 per cent stake before the placement. And Boardwalk is jointly developing the Ferndale project, with the right to earn a 50 per cent interest by undertaking exploration and feasibility studies.
The immediate priority at Coalworks, says Mr Mitchell, is completing the study on Vickery South, which is due by November. The coking and thermal coal project being developed with Japanese trading company Itochu has identified a resource of 58.5m tonnes. A pre-feasibility study estimated the capital cost would be about $206m up to 2016.
