What you need to know about the huge $1.4bn Coronado Coal float
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US-based Coronado Coal has launched a $1.4 billion initial public offering, which if successful will be the biggest coal mining float since Yancoal Australia’s $1.5 billion listing in 2012.
The miner is working to complete an initial public offering to raise between $1.2 billion and $1.4 billion selling shares at $4 to $4.80 each.
(Technically it’s selling chess depositary interests or “CDIs” which are a proxy for trading foreign shares on the ASX.)
The IPO will give Coronado a market value of between $3.9 and $4.6 billion on listing.
The cash raised will be used to pay down debt and provide Coronado with greater financial flexibility to pursue growth opportunities.
The company was founded in 2011 by The Energy & Minerals Group (EMG), Garold Spindler and James Campbell.
Mr Spindler is the CEO and Mr Campbell is the president and chief operating officer of Coronado and both have more than three decades of experience in coal mining.
Post-listing EMG will retain a 69.1 per cent stake, management will retain a 0.9 per cent stake and new shareholders will own 30 per cent.
Coronado has eight producing mines in Queensland and the US.
Through its acquisitions, Coronado has grown its coal sales from less than 500,000 tonnes in 2013 to more than 20 million tonnes in 2017 – making it one of the biggest metallurgical coal producers outside of the major diversified miners.
“We believe that we are positively differentiated from other Australian and US-listed coal producing companies through our scale, geographical diversification, low-cost operations, metallurgical coal focused production and focus on shareholder returns,” chairman Greg Martin said in the prospectus released this week.
“We sell our metallurgical coal products to both the domestic steel markets in the US and export steel markets globally, with flexibility to respond to changing market conditions.
“We are competitively positioned on the global seaborne metallurgical coal cost curve, with lower cash costs than some of the world’s largest coal producers.”
Coronado owns the Curragh mine in the Bowen Basin, a 60,000 sq km area in central Queensland.
The Bowen Basin hosts Australia’s biggest coal reserves and virtually all of the known mineable prime coking coal, according to the Bowen Basin Underground Geotechnical Society.
The former Wesfamers-owned Curragh mine produces 8.5 million tonnes of metallurgical coal each year.
Metallurgical coal is a low-ash, low-sulphur and low-phosphorus coal that can be used to produce high-grade coking coal – an essential part of the steelmaking process.
Chinese steel market sentiment improved in early September on the back of a more positive outlook for domestic steel orders, according to S&P Global Platts.
“The Chinese steel market is coming into a seasonally stronger period and steel inventories remain relatively low, which should help support demand and prices in the next month,” said Paul Bartholomew, senior managing editor of steel & raw materials for S&P Global Platts.
“However, there is still residual uncertainty in China’s steel market – and among China’s export customers – caused by ongoing talk of further US trade tariffs and retaliatory measures.”
The World Steel Association forecasts global steel demand will reach 1.62 billion tonnes this year – an increase of 1.8 per cent over 2017.
Global steel demand is expected to grow a further 0.7 per cent to 1.63 billion tonnes in 2019.
The coking coal price hit a high of $US202.35 ($279.41) per tonne during FY18 – a 47 per cent increase since the start of the fiscal year. While it has come back a bit to currently trade at $US178.70, it is still nearly 30 per cent ahead, according to pricing data from S&P Global Platts.
Coronado is expecting to book earnings before interest, taxes, depreciation and amortisation (EBITDA) of $US578 million ($798 million) for 2018.
It expects to increase that by over 27 per cent to $US737 million in FY2019.
Coronado will announce the final price of the IPO on October 22 following a bookbuild.
It is aiming to start trading on the ASX on Monday October 29.
On the backburner
Multi-commodity explorer AMD Resources has dropped its planned IPO to raise up to $20.3 million.
The company was initially aiming to hit the ASX on August 6 following the completion of an IPO to raise between $10.4 million and $20.3 million at 50c per share.
AMD’s priority is its Normanby Island gold project in Papua New Guinea and Cumberland silver and gold project in North Queensland.
Explorer Titanium Sands (ASX:TSL), meanwhile, has been trying to relist on the ASX since early April.
The company has released a second supplementary prospectus outlining a new closing date of October 19 for its $6 million raising. The target listing date has been pushed to October 31.
Titanium Sands had no assets but earlier this year struck a deal to acquire Srinel Holdings Limited, which owns a high-grade ilmenite-leucoxene project on Mannar Island in northwest Sri Lanka.
Ilmenite is the main source of titanium dioxide (TiO2), which is used in paints, fabrics, plastics, paper, sunscreen, food and cosmetics.
Leucoxene is a fine, granular alteration product of titanium minerals. Although it is not a recognised mineral species, the name leucoxene has been applied to products with a TiO2 titanium content ranging from 70 per cent to 93 per cent.