Elph pays $16.9m for Coote rail stock

Coote Industrial has signed a deal to sell 194 container wagons from subsidiary Gemco Rail to Elph, the company's largest shareholder.

In a statement to the Australian Securities Exchange Coote said because the sale is to Coote's largest shareholder the company has commissioned an Independent Expert's Report and the deal will be subject to shareholder approval.

The rolling stock was to be leased by Gemco to IMX Resources subsidiary Termite Resources.

"The details of this contract, in which the Elphinstone Group's facilitation and support role was key, were announced by Coote to the ASX on 25 May 2010," the statement said.

"Elph will now continue as lessor under this arrangement on the same commercial terms."

Under the agreement Elph will pay Gemco $2.5 million for rolling stock that has already been manufactured or is currently being manufactured.

Subsequent payments will be made as the stock is completed.

Coote said the sale provided much needed funding by releasing the capital committed to the IMX rolling stock project whilst allowing Gemco to undertake a significant volume of work to complete the manufacture of the rolling stock, and provide ongoing maintenance of the wagons under a five-year maintenance contract with the operator.