Czech deal for coal group Coronado abandoned
Czech investment group Sev.en has failed to gain control of coal miner Coronado Global Resources after the $1.5bn deal fell foul of the Foreign Investment Review Board.
Czech investment group Sev.en has failed to gain control of coal miner Coronado Global Resources after the $1.5bn deal fell foul of the Foreign Investment Review Board (FIRB).
Sev.en, a family-owned business based in Prague, had launched a bid last September to buy 51 per cent of Coronado, which mines coal in Queensland’s Bowen Basin and the Central Appalachian region of the US.
Sev.en’s planned purchase from private equity firm Energy & Minerals Group (EMG) underscored an aggressive strategy to acquire coal mines and coal-fire power plants in its homeland before expanding into the UK and US.
Coronado told the ASX on Tuesday that EMG had terminated the deal, which was scheduled to be completed on June 22, “in light of certain conditions not being satisfied, including receipt of FIRB regulatory approval.” Sev.en is also a part owner of Queensland’s Callide coal plant, controlled by the Queensland government’s CS Energy.
In April, DataRoom reported on doubts the deal would go ahead. Since the transaction was announced, the price of metallurgical coal – the type of coal produced by Coronado which is used to make steel – had fallen significantly.
The deal would have been Sev.en’s third major investment in Australia’s fossil fuel industry, headlined by its acquisition of the Vales Point coal power plant – which it recently said could run longer than previously scheduled.
Coronado did not elaborate on the reasons for the failure of the deal but industry sources indicate falling coal prices as well as regulatory hurdles could be in play.
Metallurgical coal reached a high of $US300 per tonne in September last year but had since retraced to around $US249 per tonne.
Se.ven said no actual regulatory concerns had been raised by any of the parties but the timeline for approvals was not within its ́control and was dependent on various factors including the cooperation of regulators, the target company, and other parties.
Sev.en chief executive Alan Svoboda said the company had carefully re-assessed the transaction and concluded that terminating the deal was in its best interests. “The
group therefore does not intend to seek to extend, renegotiate, or continue with the deal,” said Mr Svoboda. “We will continue to look for new opportunities to grow our portfolio.”
Sev.en also has a 12.5 per cent stake in Queensland coal-fired power generator Callide C, which has struggled to restart production after a massive fire ripped through the power station in 2021 and has been blamed for pushing wholesale electricity prices higher.
Coronado was founded in 2011 by EMG, Garold Spindler and James Campbell. It has grown through a series of acquisitions in Australia and the United States, including the Curragh coal mine in Queensland in 2017 for $700m.
Coronado shares are down more than 32 per cent this year as big institutional investors broadly shunned coal-related equities. Coronado entered talks to merge with Peabody Energy in 2022, but the deal never proceeded after Peabody objected to the terms.
Coronado chairman Gerry Spindler told investors earlier this month that since the company listed on the ASX in 2018, the world’s need for steel has not diminished.
“In fact, it continues to increase in line with urbanisation and industrialisation plans in emerging nations, first world infrastructure replacement, and the global push towards renewables.” Mr Spindler said.
Industry research shows that global steel production between now and 2050 was forecast to increase by 16 per cent to 2.2 billion tonnes.
“This growth in demand is being led by India, one of Coronado’s key export markets,” said Mr Spindler. “The world needs steel, of which met coal is an essential input. Industry forecasts show that potential alternatives to met coal in steel production are unlikely to materialise in scale for decades.”
EMG executive chairman John Raymond said last year the Sev.en deal would have left Coronado “well positioned for continued long term success.”
“When we formed Coronado twelve years ago, we did so with the objective of becoming one of the industry’s leading metallurgical coal businesses with a large-scale resource base, strong balance sheet and a best-in-class management team,” said Mr Raymond.
“With these constructs in place as we transition the business to Sev.en, the Coronado platform remains well positioned for the future given Sev.en’s deep understanding of metallurgical coal fundamentals complemented by their strong balance sheet and stated objective to continue to support and grow the business.”
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