Bulk: Coal producer TerraCom fires up with a whopping $63m restructuring deal
It looks as if investors and financiers are definitely still interested in a good coal punt, with coking and thermal coal producer TerraCom (ASX:TER) winning a partially underwritten $63m restructuring funding deal.
TerraCom, which has two operating mines in Queensland and Mongolia, is undertaking a fully underwritten entitlement offer priced at 58c per share to raise an initial $35m.
Petra Capital is the underwriter for the entitlement offer, which is also sub-underwritten by existing shareholders Bonython Coal No 1 and Noble Resources International, and a third party, Mistlake.
TerraCom has also locked in a US$20m convertible bond deal with shareholder OCP Asia.
It’s a three-year convertible bond with a strike price of 69.6c and an interest rate of 9.95 per cent per annum.
Investors liked the news, pushing shares up over 8 per cent to 60c on Friday morning.
“It will provide the company with expansion and business development opportunities with its new restructured balance sheet … as well as providing the opportunity for the board in due course to deliver on its short-term goal of paying a maiden dividend to shareholders.”
Warwick Grigor, executive chairman and managing director of Sydney-based private investment bank Far East Capital, reckons the coal sector has still got plenty of fire left in it.
“The world would stop turning if you shut down coal-fired power stations overnight. It’s going to be probably a 40- or 50-year transition before you’re going to see the eradication of coal mining and coal-fired power stations,” he told Stockhead this week.
“And you’re never going to shut it out totally because there are reasons of practicality and economics which will persist.
“So if you’re lucky enough to have an operating coal mine now, you’re guaranteed very high profit margins as far as the eye can see.”
Grigor reckons coking coal will also enjoy the same nice profits because Chinese steel demand is still strong, and coking coal will face similar social pressures as thermal coal that slow down, delay or prevent the opening of new mines.
The Solomon Islands government is appealing a court decision to overturn its cancellation of Pacific Bauxite’s (ASX:PBX) licence for the Nendo bauxite project.
In early April, the High Court of the Solomon Islands found in favour of Pacific Bauxite, ruling that the government’s decision to cancel the licence was “beyond power, quashed, and declared null and void”.