Challenging environment for Coronado’s bid to mine the market

The miner, with assets in Australia and the US, delivered its results on Tuesday, handing down a $US123.2m loss. Picture: AFP

Coronado Global Resources was still in a trading halt after market on Wednesday as advisers Credit Suisse, Goldman Sachs and Citi remained in search of $US150m ($210m) from equity investors.

The coal miner has plans to tap the market for up to that amount through a placement, and some suspect the raise could be a discount of about 10 per cent to its last traded share price of 82c, although a price was still to be determined late Wednesday.

It is understood that its major shareholder, Energy and Minerals Group, which holds almost 80 per cent of the stock, will not participate.

While buying shares in a coal company right now may not be for the faint-hearted as the commodity price remains depressed, upside could exist for those with strong nerves.

For every $10 a tonne rise in the price of hard coking coal, the company stands to make an additional $US100m in earnings before interest and tax.

Coronado is in need of cash, with its market value at $807.4m and net debt of $US404.9m. In May, it received a waiver agreement from its lenders until February. Its value is a far cry from the $3.87bn Coronado was worth when it listed about two years ago.

The coal miner was floated by its private equity owners shortly after acquiring the coking coal mine Curragh from Wesfarmers for $700m — a value far less than what it was priced at when listed.

The miner, with assets in Australia and the US, delivered its results on Tuesday, handing down a $US123.2m loss.

It generates about 21 per cent of its revenue from the out-of-favour thermal coal, while coking coal accounts for the remainder.

Investment bank Credit Suisse was recently sounding out investors to test their appetite for a potential acquisition of Coronado stock, and a heavily dilutive equity raising was thought to be on the way to shore up its position, as first tipped by DataRoom on Tuesday.

It comes as banks shy away from lending to companies exposed to coal due to environmental concerns.

Following Tuesday’s results, analysts discussed the possibility of an equity raising in their research notes, broadly favouring asset sales or other forms of capital raising as opposed to a placement. Analysts said raising “deeply discounted equity” was “less palatable” than the option of raising equity through US junk bonds or vendor finance to bridge the period of lower coal prices.

ADDITIONAL REPORTING: LACHLAN MOFFET GRAY