APAC joins coal rush in price spike

APAC Coal Ltd has joined a flurry of Australian companies looking to take advantage of booming coal prices by raising money to invest in international coal mining projects.

APAC plans to raise $15 million by selling 75 million shares at 20 cents each, and aims to develop a flagship thermal coal mine over 68,000 hectares in East Kalimantan, Indonesia.

Chairman Paul Piercy said the company originally wanted to launch its initial public offering in December 2007.

The stockmarket downturn forced the company to sit tight and Mr Piercy acknowledged current market conditions were not ideal.

“If anything this is not a very opportune time for an IPO, the market’s not very happy,” he told WA Business News.

However, the metallurgist and former Rio Tinto senior executive said the recent spike in negotiated coal prices made the current timing “fortuitous”.

APAC is following another Perth-based coal explorer Handini Resources Ltd, which was due to be listed on the Australian Securities Exchange on April 28 after raising $5 million in its IPO.

It also follows Victoria Park-based Coal Fe Resources Ltd, which listed on the ASX in April 2007. Queeensland-based Whitehaven Coal Ltd and South Australia’s Sapex Ltd also listed in May 2007.

In addition, Como-based Aquila Resources is exploring for coal in Mozambique and Botswana, and Coal of Africa Ltd (formerly GVM Metals Ltd) also has thermal and metallurgical coal projects in South Africa.

They join established coal player Straits Resources, which has coal mining interests in Indonesia.

Bell Potter Securities has monitored the boom of the coal industry and is wary about some of the projects chasing money.  

Corporate analyst John Jeremiah said although Australia’s leading coal producers are on fire, like all booms, investors should be diligent about who they invest with.

“There’s a lot of demand, but only in the short-term, so some companies are taking advantage of short-term demand for energy, especially in regions like China, Indonesia and Vietnam,” he told WA Business News.

“Over here for businesses it’s more of an internal market.”

With coal currently selling at $US130 a tonne, Mr Jeremiah warned prices could drop as low as $US55 tonnes by 2011-12. He said the current demand cycle had allowed poor quality coal to enter the market.

Exploration at APAC’s East Kalimantan project found that an 8.9 square km area known as the Bekoso-Lempesu block, which comprises 1.3 per cent of the total concession, had the best coal potential, based on quality.

The company expects ash content of up to 39.5 per cent and sulphur to range between 1.21-4.64 per cent.

In contrast, Straits Resources subsidiary Straits Asia Resources, which owns and operates the Sebuku coal mine in Indonesia, in the South Kalimantan province, has a coal ash content of 9.3 per cent and sulphur content of 0.7 per cent.

Mr Piercy said APAC would screen and wash its coal to reduce levels of ash and improve overall quality.

On completion of the IPO, the vendors, which include Singapore-listed group Magnus Energy Group, will hold 66 per cent of the issued capital. The company will have a market capitalisation of $90 million.

The investigating accountants for the IPO are Deloitte and its Australian solicitors are Steinepreis Paganin Lawyers & Consultants.