|It's set to be a rare spectacle soon on the Singapore stock market.
A Swiss-based private commodities investment company has committed to buy US$35 million worth of equity of coal producer Geo Energy Resources.
This will be through market purchases and directly from Geo Energy, with most (ie US$20 million) of the investment by Resource Invest AG to be completed within the next 8 weeks on the open market.
Among other things, Resource Invest will buy US$5 million of Geo Energy’s treasury shares this month (Feb 2024) at S$0.45 per share.
(It will buy another US$5 million tranche of treasury shares in Feb 2025 at S$0.50 per share).
Furthermore, Resource Invest will purchase Geo Energy shares in the open market for an aggregate US$20 million, comprising
|i) US$10 million within the next 4 weeks or in any event by 31 March 2024, and
ii) another US$10 million within the next 8 weeks or in any event by 30 June 2024.
It aims to acquire a total of at least a 5.5% stake by 31 March 2026.
Geo Energy (recent market cap: S$550 million) gave these details in a filing to the Singapore Exchange yesterday evening.
Resource Invest's share purchase plan is unusual, at least in the context of the Singapore market, as it is not only revealed in advance to the market but it is also to be executed over a short number of weeks/months.
The US$25 million firepower to be deployed over the next few months will not bring its stake to a substantial shareholder level (ie at least 5%), and thus does not obligate it to report the progress of its accumulation to the market.
But certainly investors would hope it does update the market with such announcements periodically.
Resource Invest has entered into a complex investment agreement which will also see Geo Energy issue 41.4 million warrants for free to Resource Invest.
The exercise prices of the warrants (to be issued in 2 tranches) -- 55 cents and $1.00 per warrant -- are way above the recent traded prices of Geo Energy's stock (~40 cents).
All in all, Geo Energy's stock which has run up about 25% in the past 12 months is set to be buoyed by Resource Invest -- at least over the next couple of months.
There is also, longer term, the strongly positive implications of a new offtake agreement (see below).
|Life-of-mine offtake for Triaryani coal
Resource Invest figures in another part of Geo Energy's announcement yesterday, one of the most significant in its 11-year listing history.
EPH Group is a large European energy utility that owns and operates assets in the Czech Republic, the Slovak Republic, Germany, Italy, Ireland, the UK, France, the Netherlands and Switzerland.
Resource Invest had assisted in arranging and managing an offtake agreement whereby EP Resources AG, part of EPH, one of the largest European energy groups, has committed to offtake 75% to 85% of export volumes of Triaryani coal.
(For more on EPH and its controlling shareholder, see graphic)
The offtake covers up to 12 million tonnes of coal per annum for the life of mine which has been estimated to be 15 years.
• Geo Energy recently acquired a 73.11% stake in PT Golden Eagle Energy Tbk, which in turn owns 85% of the Triaryani mine.
• Triaryani has an estimated mining valuation of US$1 billion, with a 2P (proved and probable) JORC coal reserves of 275 million tonnes and a coal resource of 388 million tonnes.
Recently majority acquired by Geo Energy, Triaryani has a mining concession in South Sumatra, Indonesia.
The low sulphur and low ash content in its Triaryani coal is attractive to both domestic and international markets, says Geo Energy.
The coal is eco-friendly and one of the cleanest coals available in the thermal coal market.
There is a positive impact on Geo Energy's working capital and cash position from both the offtake agreement and the equity investment mentioned above:
|• EP Resources will make available a standby prepayment facility of up to US$20 million.
• Geo Energy will raise approximately S$13.4 million through the sale of its treasury shares to Resource Invest.
Geo Energy's Executive Chairman and Group CEO, Charles Antonny Melati, said: "With EP Resources on board, we are well placed to achieve greater heights, affirm our position as one of the biggest Indonesian coal companies and realise our vision of bringing Geo Energy into a billion-dollar business.”