• Australian Pacific Coal has doused hopes of a quick resolution to the M & A slugfest erupting around the Dartbrook coal mine
  • It says it is considering its position in response to its creditor Trepang’s decision to back a new JV proposal from Tetra Resources and Javelin Private Capital Group

 

The battle for control of the Dartbrook coal mine is more absorbing than the war between the British tabloid press and Meghan Markle would have been if, for some reason, she found herself next in line for the Queen’s throne.

(I don’t profess to really care about how the line of succession works so don’t hound me with complaints about any factual inaccuracy here ya weird royalists).

And since the British monarchy has an ‘order of things’ doesn’t pit multiple billionaires and wannabe billionaires against each other in a tussle of strength, fortune and wit to rival your last Dungeons and Dragons campaign, this is much more exciting.

To recap, Nathan Tinkler got into a company called Australian Pacific Coal (ASX:AQC) back in 2015 which was trying to revive Anglo Coal’s long shuttered Dartbrook mine near Muswellbrook in the Hunter Valley.

He was gone soon after amid bankruptcy proceedings that eventually meant the former coal baron couldn’t run companies for a while in Australia (he now can).

The company’s backers Trepang Services stayed in. Bankrolled by pearling mogul Nick Paspaley and businessman John ‘Foxy’ Robinson, Trepang kept AQC running through a very tough period when coal prices tumbled and the mine looked like it would be kept in chains forever by a tempestuous approvals process.

Eventually AQC got its 2027 extension from the NSW Government against the complaints of local horse breeders, with Trepang poised to buy out the mine in exchange for the erasure of AQC’s debt.

Except then a situation few anticipated emerged.

Russia invaded Ukraine, sparking an energy crisis in Europe and South East Asia. Thermal coal prices soared past US$400/t, defying expectations the market would contract over time due to the rising penetration of renewable power.

A wild Tinkler reappeared, backing two separate bids for control of AQC, most recently at $1 a share under the guise of Pacific Premium Coal, 8x its share price before Tinkler’s first offer popped up.

Then came Matt Latimore and his coal trade M Resources, which made two separate proposals, including one which sounded good to the AQC board; a JV and $100 million entitlement offer that would be used to pay off the debt held by the Trepang interests.

 

Wait though …

Trepang now has thrown its support behind another party seeking a slice of the pie called Tetra Resources, which wants to JV the mine with AQC with the support of funding from Javelin Private Capital Group, the merchant and investment banking arm of a big commodities trader headquartered in the UK.

There are clear links. Tetra is helmed by Brian MacDonald, one of the directors proposed by Trepang in a notice to spill the AQC board a couple weeks back.

AQC has its response out today to the news transmitted by Trepang on Friday.

And they don’t seem too receptive, sending AQC shares down 16.13% today.

The deal would include a debt placement by Javelin, US$65m pre-pay loan between the Dartbrook JV and Javelin and a coal marketing agreement, something the trader is obviously keen to get its hands on given the price of the commodity right now.

A debt moratorium agreement would also need to be agreed between Trepang and AQC.

“The Board does have a general concern that the Tetra/Javelin Proposal would see the Company or its Dartbrook project being burdened with additional debt, without its existing debt being paid off first,” AQC’s board said in an update to the market today.

“The Company has engaged a third-party financial adviser who is assisting the Board in their independent assessment of proposals that have been received.

“AQC has taken initial advice on the Tetra/Javelin Proposal before it and the matters that would need to be addressed before such a proposal could become binding and certain to proceed, including the probability that such matters will be addressed.

“At the moment the Tetra/Javelin Proposal remains uncertain.”

Given the issues we’ve had making heads or tails of the whole situation this can’t be easy for AQC’s board, which is concerned that Trepang would only offer a debt moratorium if its chosen proposal wins out, preventing AQC from accepting the offer that is in the best interest of shareholders and then going from there.

This, it seems, will get more complicated before it resolves.

 

Australian Pacific Coal (ASX:AQC) share price today: