Coronado Global Resources is understood to be in negotiations with the Queensland Government for a deal to get $150m up front to provide thermal coal in return for an extended supply agreement beyond the Brisbane Olympics in 2032.
It comes as Oaktree Capital Management could be closing in on the cash strapped Coronado Global Resources based on revelations from the company on Wednesday it had offered a $150m financial lifeline in the form of a loan.
Sources have suggested that the government knocked back requests by Coronado for royalty relief, and the latest agreement will see it extend a coal supply contract until after the 2032 but at a very low coal price, possibly as low as $US30 a tonne.
In March, thermal coal was trading at $US100 a tonne.
Coronado would pay back the $150m loan through coal supply.
The Australian listed miner paid about $120m in royalties last year to the Queensland government-owned coal fired power station operator Stanwell Corp.
Stanwell buys three million tonnes annually of thermal coal from Coronado at a discounted rate for power, but from early 2027 the contract was to come to an end.
Without the latest deal on the table, Coronado would not have to share in proceeds from coal exports with Stanwell and would only have to sell it about 2m tonnes for power, freeing up a further one million tonnes that could be exported.
Analysts had earlier said 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 company that is 51 per cent owned by resource private equity firm Energy and Minerals Group said that the three-year refinancing deal reached with Oaktree was for its asset-based lending facility, which is understood to be first in line to secure its money owed and coal supplies should it collapse and replaces an ABL loan with HSBC and DBS.
It would draw $75m up front, and the remainder can be drawn down in minimum $25m increments for a further 12 months, subject to compliance of coventant terms, to navigate the low coal price environment.
The coupon on the new facility is at a fixed interest rate in the mid-teens, well below the current 18 per cent yield on Coronado’s high yield notes, the company said.
The facility can be refinanced or repaid at any time, and after 18 months, without any prepayment penalty.
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 coal price was over $US200 a tonne, the level it needs to be for its key assets to be profitable.
It comes with speculation in the market that Czech group Sev.en had purchased bought more than $US40m ($62.2m) of the Coronado Global Resources debt, a move that had some questioning whether it may be the first move towards a takeover.
Sev.en sources have denied that it has bought debt, but market sources say agents in the market that have previously been linked to Sev.en have been acquiring loans on its behalf at a time its bond is trading at 67c in the dollar.
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.
But the deal collapsed when it refused to recut the 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.
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