Phoenix Coal has agreed to pay $46 million cash for Solid Energy's Stockton, Rotowaro and Maramarua mines, plus a 'contingent payment', Bathurst Resources revealed today.
Phoenix is a joint venture between Bathurst Resources (65 percent) and Talley's Group (35 percent).
Bathurst will contribute $26 million and Talley's $14 million, Bathurst's presentation to the sharemarket reveals. Phoenix has a BNZ debt facility of $15m.
Phoenix has also agreed to pay Solid Energy a "semi-annual contingent payment" of up to $50m, based on a sliding scale share of Phoenix Coal's actual coal sales revenue from Stockton mine.
The payment is subject to coking coal prices being above certain thresholds. It only becomes operational when prices are above $150 a tonne. They are currently $363/tonne (US$260/tonne).
The contingent payment structure is subject to a maximum four-year term. It doesn't contain any volume or production commitments.
The sharemarket presentation reveals that Bathurst formed the joint venture with Talley's because Solid Energy wasn't convinced Bathurst could fund its bid alone.
Bathurst plans to fund its $26m to Phoenix Coal from redeemable convertible preference shares, a convertible note and bonds.
The conditional sale and purchase agreement between Phoenix and Solid Energy requires approval by the New Zealand Overseas Investment Office. This is expected by the end of June next year.
The presentation lists more than 30 risks to investors including difficulties obtaining regulatory approvals, insufficient Crown indemnities, insufficient capital raising, fluctuations in coal prices, incorrect resource estimations, and competition.
The sharemarket presentation said acquiring Stockton would speed up Bathurst's entry into the export market. It would provide Bathurst with established customer relationships, infrastructure and resources.
Together with Bathurst's existing Buller plateau assets, it would provide an opportunity for a premium coal blend and increase the scale of Bathurst's export marketing operation. It would allow the use of Stockton infrastructure for Bathurst's Escarpment Mine and, later, Whareatea West.
Stockton's key infrastructure included a coal handling plant with capacity for 1.8 million tonnes a year, a 2.5km aerial ropeway with an average capacity of 289 tonnes an hour, and the Ngakawau rail loader with both rail and truck loadout capacity.
Bathurst expected Phoenix Coal to produce between 900,000 and 1.1 million tonnes from Stockton in the 2017 calendar year, subject to pricing for blended Stockton coal.
The mine is currently producing about 1 million tonnes a year but has capacity for 2.2 million tonnes a year.
Stockton coal is sold mainly to Japan, China and India. The mine had an economic life of about 11 years under its current mine plan, with development options that could extend the mine life, the sharemarket presentation said.
Bathurst expects to produce about 700,000 tonnes a year from Rotowaro, which has historically produced between 1.2 and 1.6m tonnes a year for the domestic market.
Maramarua is in an advanced state of stripping.
The Crown has agreed that environmental indemnity funding, currently only available to Solid Energy, will be available to the new owner. The indemnity funding is $48.8m for Stockton, $13.2m for Rotowaro and $3.3m for Maramarua.
- Westport News