Czech investor Sev.en may have a second tilt at the battling Coronado

Coronado’s entire market value is close to $319m.

Czech investor Sev.en could be hovering around Coronado Global Resources, despite its future hanging in the balance.

Sev.en in 2023 was to buy a 51 per cent stake in Coronado from the Houston-based private equity firm Energy and Minerals Group, but broke the deal last year when the coal price fell.

The share price at the time implied a deal price of about $1.5bn.

Now Coronado’s entire market value is close to $319m, as it finds itself urgently needing money, but it may not be down for the count.

But when it no longer has to pay a burdensome royalty to the Queensland government-owned Stanwell Corp, which cost about $US120m last year and this year about $US7m a month, it will be in a far better financial position.

Coronado sells three million tonnes annually of thermal coal to Stanwell at a discounted rate for power, but from early 2027, it will not have to share in proceeds from coal exports with Stanwell and will only have to sell it about 2m tonnes for power, freeing up a further 1 million tonnes that can be exported.

Analysts believe this could add an additional $US80m of annual revenue and a $US160m turnaround in cashflow based on the royalty that Curragh is paying today.

The metallurgical coal price is currently trading at about $US190 a tonne after falling to below $US170 a tonne in February and mining coal at Coronado’s flagship Curragh mine in Queensland is largely only profitable at over $US200 a tonne.

Ratings agency Fitch has downgraded its credit rating to B from B+, forecasting that it will generate an annual earnings before interest, tax, depreciation and amortisation loss and negative free cashflow of more than $US350m, but it accepts Coronado will secure more debt.

Also helping Coronado is that it has added the Mammoth underground mine expansion to its Curragh complex to expand production at a more cost-effective rate, while its Buchanan mine in Virginia is ramping up.

If Coronado can use its $US325m of liquidity to get it through to late 2026 when its royalties arrangement expires, and the coal price picks up, its future could be far brighter.

Sev.en would have undertaken plenty of work on Coronado and is being mentioned in the market as a potential refinancing candidate, but some think it is also weighing up a move to consider securing majority control, knowing the potential future upside.

Sources say the only reason the deal fell over last year was a disagreement over price.

The question also is whether EMG is a seller at such a price out of Coronado, or whether it stands behind the business.

White Oak, Ares Capital and potentially Canyon Partners may be lined up to provide emergency funding for Coronado. Another could be Farallon Capital.

Market sources believe that there is confidence Coronado will secure the funds to replace its asset-backed lending facility with another $US150m loan that has better terms.

It currently holds $US96m from the facility, and one of its conditions is that the company has $US100m on the balance sheet.

It implies that Coronado’s $US325m of liquidity, comprising $US229m of cash, is more like $US225m when factoring in the obligations.

It has $US194.9m of net debt with $US424.4m of interest-bearing liabilities, including $US400m of senior secured notes with a 9.25 per cent interest rate.

The business was founded in 2011 by EMG, Garold Spindler and James Campbell and grew through a series of acquisitions in the US and Australia – including the Curragh mine in 2017 for $700m.

Coronado was floated the following year but, on the first day of trade, its share price finished down 10 per cent with a market value at $3.5bn.

It has aspirations to produce 20.5 million tonnes of coal by 2025 and had 15.3 million tonnes of group saleable production last year.

It’s also not the first time that Coronado has struck challenges.

It raised equity in August 2020, securing $250m to boost finances amid the pandemic to pay down debt. Lenders offered a waiver.

Funds were raised at 60c per chess depository interest, a 27.3 per cent discount to the last closing price.

Then, the coal price was below $US200 a tonne after being above that level in 2019.

Coronado also entered talks to merge with Peabody Energy in 2022, but the deal never proceeded.

Sev.en, a family-owned business based in Prague, has moved aggressively to acquire coal mines and coal-fired power plants in its homeland before expanding into Britain and the US.