Coal Asia Considering Strategic Investors

MANILA, Philippines — Aside from raising funds from a planned P800 million initial public offering, Coal Asia Holdings is talking to several potential foreign strategic investors for its coal mining projects in Mindanado.

In an interview, Coal Asia chairman Harald Tomintz said these talks are in the preliminary stages and its too early do disclose the identities of these prospective investors.

He said they were also negotiating with a Canadian mining firm for a possible investment in the company earlier but this did not push through.

"With the coming IPO, we should have enough cash to bring our coal mines into production. Thus, we are not in a rush to get a strategic partner," Tomintz said.

He added that this is why they got a NI43-101 certification, the North American equivalent of JORC, for their coal mine aside from being compliant with the Philippine Mineral Reporting Code.

The P726.87 million net proceeds from the IPO should allow the company to bring its Davao Oriental mine into production by 2014 and its Zamboanga Sibugay mine should follow suit by 2015, Tomintz said.

Of the proceeds from the IPO, P100 million will be spent for the completion of the exploration and feasibility study of the Davao Oriental mine, P400 million for the development of the Davao mine, and the balance for continued exploration at the Zamboanga Sibugay mine and for working capital requirements.

Coal Asia is planning to sell 800 million new common shares, at one peso per share, equivalent to about 20 percent of its P4 billion outstanding capital stock after the IPO.

The firm has tapped Abacus Capital & Investment Corporation to be its issue manager and underwriter.

Coal Asia is the parent company of Titan Mining and Energy Corporation (TMEC), which owns mining exploration and development rights in Davao Oriental and Zamboanga Sibugay.

It intends to take advantage of market confidence in energy stocks due to continued rising demand for thermal coal fuels both in the domestic and international power-generating sector.

The firm said mine developments are on-track with commercial production of 600,000 metric tons of high grade coal per year scheduled 2014.

Coal Asia said a June 2012 Preliminary Feasibility Study on Coal Operating Contract (COC) 159 in Davao Oriental (7,000-hectare area) covering a small 214-hectare area concluded the economic viability of the area.

The study showed an observable Coal Reserves yield factor of 28,000 tons per hectare which translates to an estimated market value of P23.8 billion.

An earlier Philippine Mineral Reporting Code standard geological report, done in April 2012, on COC# 159, 166 and 167 in Davao Oriental and Zamboanga Sibugay identified total potential Coal Resource of 120 million metric tons.

Furthermore, an independent valuation report prepared by Multinational Investment Bancorporation dated May 2012 valued Titan's coal assets at P12.5 billion. (JAL)

Coal Asia has already bagged off-take contracts both here and abroad but is also eyeing the export markets including India, Japan, Taiwan, Hong Kong and Vietnam.

Company officials are also confident that, as their higher grade coal sources are located in Mindanao, it is in the right place at the right time with the expected explosion in demand by large scale energy producers racing to establish their coal-fired energy generating plants.

Demand is also seen coming from cement plants already in place in the region as they too prepare for the impending growth of Mindanao through the government's plans to establish key economic zones in the country's southern-most region.