Tinkler, Tetra, Javelin vie for soul of Australian Pacific Coal
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The schoolyard game of King of the Pack forming around heavily indebted coal minnow Australian Pacific Coal (ASX:AQC) has taken another turn, with the potential kingmaker officially throwing its support behind the newest bid to develop the Dartbrook coal mine.
AQC’s presumably exhausted board has spent the past three weeks working through a string of proposals coming in so thick and fast the only people who can remember all the ins and outs have probably also memorised the intros of all 6 Star Wars films.*
(*Disney ones don’t count obv.)
There have been two offers from businesses backed by fallen coal baron and one-time Bogan Billionaire Nathan Tinkler, the latest a $1 per share bid for control of the company valued at around $50 million.
That came after the cancellation of a previous offer to buy the mine from major shareholder and creditor Trepang Services, and a bid from Matt Latimore’s coal trader M Resources, the biggest shareholder in Queensland met coal play Bowen Coal (ASX:BCB), which has since given way to an offer for a 50-50 JV in conjunction with a $100 million rights issue underwritten by M Resources and Evolution Capital.
The latest is a bid from a group linked to coal executive Brian MacDonald called Tetra Resources and commodity trading house Javelin Private Capital Group, to JV the mine 40-60 between Tetra and AQC and place a moratorium on the debt held by Trepang, which is backed by pearling rich-lister Nick Paspaley and John “Foxy” Robinson.
That group is the potential kingmaker in this whole thing because they hold the joker in pack, around $70 million of AQC debt.
And Trepang has now spoken, saying it supports Tetra and Javelin’s bid to develop the mine. That is not surprising given Brian MacDonald was one of the directors proposed by Trepang in a recent notice to spill the AQC board.
“Trepang believes the Joint Venture proposal by Tetra/Javelin promises the highest value and the most accretive outcome for AQC shareholders and for the development of the Dartbrook project,” a statement from Trepang said.
“AQC’s current plan results in the economic interest of existing shareholders in AQC being slashed to an immaterial level of approximately 7%, before the mine restart is funded (which would almost certainly result in further dilution).
“This contrasts to the proposal tabled by Tetra/Javelin, which would result in existing AQC shareholders retaining a 60% economic interest in the project, and this includes the mine restart being fully funded.
“As a result, in order to progress the Tetra/Javelin proposal, and subject to reaching a binding agreement and no superior proposal being received, Trepang has agreed to a moratorium on its debt, and a funding agreement between AQC and Trepang Services and its associated parties.”
AQC, which opened the 5.83 for 1 entitlement offer on Wednesday, is yet to comment on the Trepang statement.
At stake is control of one of Australia’s few undeveloped thermal coal projects with permits in place to mine, a distressed asset that has suddenly become extremely desirable (thermal coal prices above US$400/t, more than double previous records).
The mine, producing 5.5Mtpa when it was closed in 2006, is a modern day Ugly Duckling.
It recently received approvals from the NSW Government to operate until 2027 amid opposition from local horse breeders.
Located 10km from the coal mining town of Muswellbrook in the upper Hunter and 130km from the Port of Newcastle, AQC plans to have the mine up and running by the second half of 2023, producing 1.5Mtpa out of its approved 6Mtpa capacity in the 2024 financial year.
AQC wants to tap into strong demand for Australian high CV coal from South East Asia and India, where it says demand will grow to 161Mt in 2024 and 201Mt in 2035, with forward contracts for Newcastle Coal currently paying upwards of US$250/t out to late 2027.
AQC shares were up more than 15% this morning and are 8% to the good as of 2pm AEST.