India’s JSW close to a stake in Coronado’s flagship coal mine

Coronado Global Resources’ Curragh coal mine in Queensland.

Indian multinational steel manufacturer JSW Steel is believed to be closing in on a deal to buy a stake in the flagship mine of Coronado Global Resources, as its future hangs in the balance.

DataRoom understands that both Coronado directors and members of management have flown to the US for the meeting with bond holders, to whom they are appealing to for permission for their plans to proceed with an asset sale selldown.

Market experts expect that the appeal being put forward to the lending group relates to a request to retain some of the proceeds from the asset sale for operations rather than handing it all over to the lenders after the group has breached debt covenants.

It is understood that the meetings will be followed by a site visit by chief executive Douglas Thompson to the company’s flagship Curragh coal mine in Queensland next week.

DataRoom understands that JSW is the most likely candidate to emerge as a part owner of Coronado’s Curragh metallurgical and thermal coal mine.

The company, which is 51 per cent owned by Energy and Minerals Group, last month confirmed it had engaged in talks with counterparties about a potential sale of a minority interest in certain assets.

A number of miners have been in talks with Coronado, including groups like New Hope Coal, Whitehaven, and Indonesian miners like BUMA, Sinar Mas and Golden Energy Resources.

Coronado’s future continues to hang in the balance. Its market value is at $259m and its share price is at 16c after the coal price fell below $US200 a tonne, the point whereby it can profitably mine coal from Curragh.

It has refinanced a $US150m asset-based loan with Oaktree Capital Management and had reached a deal with the Queensland government-owned coal-fired power station operator Stanwell, in which Stanwell would provide a $US150m upfront payment for 800,000 tonnes of thermal coal for five years from 2027.

But sources believe that in about three months Coronado would be in a position of breaching its debt covenants on the Oaktree loan, paving the way for the opportunistic private equity fund to gain control over the group’s future.

Parties have been buying some of Coronado’s $US400m worth of bonds trading at 70c in the dollar, including EMG itself.

EMG floated Coronado in 2018 with a $3.5bn market value and agreed to sell its holding to Sev.en last year, with Oaktree helping to finance the transaction, but the deal collapsed.

The Queensland Curragh mining complex, which mines thermal and metallurgical coal, is Coronado’s major source of income.

The resources company is building underground mining operations at Curragh to extract coal at a lower cost.

The business was founded in 2011 and grew through a series of acquisitions in the US and Australia – including the purchase of the Curragh mine in 2017 for $700m.