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How Stanmore went from the scrap heap to coal juggernaut

Business

Brisbane-based Stanmore Resources will tap the markets for $US506 million ($A694 million) to fund its purchase of BHP’s stake in a Queensland coal joint venture, known as BMC.

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Success in the strategy would mean Stanmore had grown from a company which bought its first mine off the scrap heap for $1 in 2016 to become one of Australia’s leading coal producers.

The capital raising also coincided with the company raising $120 million in debt. The overall cost of the deal with BHP was $US1.1 billion with extra payments if benchmarks were reached.  Stanmore would access the rest of the funds through debt and internal cash.

The company would raise the funds through a seven-for-three renounceable, accelerated entitlement offer.  It also announced today another $US120 million would be raised through debt.

Its parent company, Singapore based Golden Investments, would subscribe for $US300 million in the offer, but would be selling down its stake through the offer to 64.1 per cent from 75 per cent.

Stanmore said the deal was transformational for the company and would create a metallurgical coal producer with a portfolio of high-quality assets.

It comes at a time when coal prices have reached record levels because of supply constraints. Coking coal was selling out of Dalrymple Bay at well over $US400 a tonne in recent days.

The supply has been hit with more disruptions because of Russia’s invasion of Ukraine. Chinese customers who planned to buy coking coal from Russia have suspended transactions, and it may lead to an interruption of coking coal import from Russia.

In its half yearly results, Stanmore said it expected the market to remain tight after prices reached record levels.

Stanmore said forecast production for the combined business for the six months ending December 2022 would about 5.9 million tonnes to 6.5mt. It would have four mines and three wash plants within a 50km radius that had the ability to increase production with little ramp up risk or development.

Petra Capital will underwrite $283 million of the offer.

 

 

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