Falling Coal Prices & Imminent Maturity Of Convertible Bonds Leads Ichor To Sell Stake In Universal Coal

  • May 03, 2019 AEST
  • Team Kalkine
Falling Coal Prices & Imminent Maturity Of Convertible Bonds Leads Ichor To Sell Stake In Universal Coal

Coal prices are falling, and the coal industry is besieged over the fall in prices. The increased global stance to curb the environmental pollution in line with Euro 6 emission standard is marking a decline of coal in the energy sector, which in turn, is exerting pressure on coal prices. The fall in coal prices is making it hard for global companies to operate in the business, which is causing significant miners to exit from the coal business.

In the past events, countries such as Germany, China, Australia took stringent actions against coal projects, which in turn, reduced the demand for coal prices and exerted pressure on its prices. Germany, in the wake of environmental concern, agreed to a plan proposed by the government-appointed commission, to phase out all the coal-powered fire stations by the year 2028.

In Australia, a court ruling dismissed the appeal against the ban on various coal project after considering the dire impact of coal production and burning to local community. Apart from such bans and suspension, China imposed a higher restriction on coal imports. Such stance by global player led significant miners to exit the coal business.

Mining major Rio Tinto (ASX: RIO) existed the coal business, and under investor’s lens, Glencore followed the same footsteps and decided to exit the coal business. However, high steel demand and production in China is supporting thermal coal prices, and few companies are now focusing on coaking coal, metallurgical coal, and avoiding thermal coal amid less demand in the global market.

In a recent event, Ichor Coal, a South African firm sold a 30% stake in its local takeover target-Universal Coal, for a price consideration of 31.5 cents a share. The company sold 151,660,000 shares through a private placement to various institutional investors. Further, as per the company, the settlement is estimated within three business days.

The investors of the company voted to sell the entire shareholding in Universal coal to a consortium led by Ata Resources on 7th January 2019 at a price consideration of A$35c per share; however, post the announcement by the company of superior offer, Ata Resources withdrew from the takeover process.

However, as per the company, after considering the maturity of its convertible bonds, the management and the board agreed unanimously to seek an alternative means of selling the company’s holding in Universal Coal.

The company initially received the support from its shareholders to dispose of its’ holding in the Universal Coal; however, Ichor intends to table the transaction in an extraordinary general meeting of shareholders (EGM). As per the company, it will also roll out its intention for the redemption of a convertible bond in this EGM. As per the company, considering the imminent maturity of the convertible bonds, the proposed transaction of shares will be completed before the EGM, and as the shareholders supported the disposal of Universal shares in January 2019, it executed an irrevocable undertaking, and the proceeds will be paid to pay the debt.


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