Nathan Tinkler’s listed Australian Pacific Coal will have just over a month to raise $25 million to complete its purchase of Anglo American’s Dartbrook coal mine.
Australian Pacific Coal, more than 37 per cent owned by Mr Tinkler, will take over Anglo American’s 83.33 per cent stake in the Dartbrook mine, located near Aberdeen in New South Wales’ Hunter Valley.
The mine has been mothballed since 2006, when it was placed in care and maintenance.
Australian Pacific Coal intends to convert the mine from its existing underground set up to an open cut operation, but will need to get environmental approvals to do so.
The company says it expects to be able to win approval, given that there are existing open cut mines operating nearby.
However, before getting to that point, Mr Tinkler’s company will need to raise the $25 million that it needs to pay Anglo American upfront to fund the purchse.
If it fails to raise the money by the end of January 2016, Australian Pacific Coal will have to pay Anglo American a break fee of $1 million.
It would not be the first time a company associated with Mr Tinkler has missed a deadline and forfeited a break fee – Bentley Resources lost a $5 million non-refundable deposit to US coal giant Peabody Energy after it failed to complete an $80 million Queensland coal mine purchase.
In addition to the upfront purchase price, Australian Pacific Coal must also provide a $7.7 million financial assurance in respect of the Dartbrook mining tenements or face another $0.5 million break fee.
In order to fund the purchase and provide working capital the company is considering a share offer to raise up to $30 million.
Australian Pacific Coal says its two major shareholders – Mr Tinkler (37.36 per cent) and Paul James Byrne (4.52 per cent) – will support any entitlements issue that may be undertaken to raise funds.
Should the finance be raised and the deal proceed, Anglo American will receive royalties of $3 for each tonne of coal the mine sells, up to a maximum of $25 million.
“We firmly believe in the resilient demand for high energy low ash thermal coal, as concerns about greenhouse emissions increase,” said Mr Tinkler in his capacity as Australian Pacific Coal’s chief executive.
“Thermal coal will remain one of the core sources for energy production and if we can position this asset to be in the lowest cost quartile we are well placed to ride on that demand.”
Australian Pacific Coal shares were up 53 per cent to 2.3 cents by 11.56am (AEDT).