New Hope in talks over potential Coronado rescue

Queensland’s Curragh mining complex is Coronado’s major source of income.

New Hope Corporation is believed to have held discussions with Coronado Global Resources about potential rescue options for the struggling coal miner as its future hangs in the balance.

New Hope is almost 40 per cent owned by Soul Patts and is one of the country’s largest steel and thermal coal producers with a $3.2bn market value and $317m net cash.

It is believed that the talks may centre on either a refinancing or an acquisition.

The news comes amid market speculation that Coronado Global Resources may not follow through with a refinancing plan offered by Oaktree Capital Management and move to sell the group’s coal marketing rights to a trader as an alternative way to secure funding.

Coronado said last week that it had a binding approval letter and entered into a binding commitment for a $150m loan to refinance its asset-based lending facility from Oaktree.

However, the agreement was still subject to finalisation of the long-form documents and the Coronado board and Oaktree’s investment committee, which meant it could still extract itself from the transaction.

Calling the shots is its 51 per cent private equity shareholder Energy and Minerals Group.

Coronado last week also confirmed reports by DataRoom that it was in talks with the Queensland government’s coal-fired power station operator Stanwell Corp about a transaction to provide $US150m ($231m) upfront as part of changes to its coal supply agreements currently in place.

DataRoom reported that the deal involved gaining thermal coal at a cheap price in return for an extended supply agreement to ensure the state had enough power beyond the 2032 Olympics.

The group’s market disclosure has raised eyebrows around the industry, particularly after Coronado did not disclose it had breached a debt covenant in December and received a waiver from lenders until February 20. A company spokesman did not comment on the reason for the delay.

In March, thermal coal was trading at $US100 a tonne.

Coronado said last week that the coupon on the Oaktree facility was at a fixed interest rate in the mid-teens, well below the current 18 per cent yield on Coronado’s high yield notes.

However, some think another option is that EMG may provide a financial lifeline until the coal price recovers.

Shares in Coronado soared almost 50 per cent on the latest Oaktree news, sending its market value to $250m, a far cry from the $3bn it was at when the metallurgical coal price was more than $US200 a tonne, the level it needs to be for its key assets to be profitable.

Coronado has $US194.9m of net debt, including a $US400m bond with a 9.25 per cent interest rate and first rights to take its mines should it collapse.

EMG floated the business 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. The deal collapsed when it refused to recut terms what with the falling coal price, say market sources.

The Queensland Curragh mining complex that mines thermal and metallurgical coal is Coronado’s major source of income, but is struggling, with the metallurgical coal price down at about $US190 a tonne. 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.