US based company, Coronado Global Resources Inc is coming up with an initial public offer or IPO and this is expected to be one of the largest IPOs after mining boom in Australia in a span of 6 years. The IPO is coming at a time when the coal markets are witnessing the negative impacts. Whether or not the weakness in the coal markets could impact the IPO would be the key to look out for. The steelmaking coal price have been witnessing downward trend on the back of heightened tensions between the US as well as China. As far as outlook for the prices are concerned, department of Industry, Innovation and Science expects that prices have weaker outlook. According to the department, the prices are expected to continue falling which could further impact the coal markets. Amidst this, Coronado would be hitting the ASX under the symbol “CRN.”
The valuation has been conducted on Coronado and it stood in the range of $3.8 billion-$4.4 billion. The price range (on a per share basis) for the company’s IPO is indicated to be in the range of $4-$4.80. The company’s coal mines have been situated in the United States as well as in Queensland. The company came to lime light when the payment was made in order to purchase Wesfarmers’ Curragh mine. Wood Mackenzie is of the view that the price is expected to be $US 176 a tonne and this estimate has helped the company in projecting its next year financial year’s earnings before interest, tax, depreciation and amortization or EBITDA amounting to $US 737 million. In 2018, the company is expected to post EBITDA amounting to $US 578 million.
The primary reasons for the IPO are the following:
- People could invest in the shares as they would be listed on the Australian Securities Exchange
- Raised funds would help in debt extinguishment
- Boost the momentum to achieve long term growth
- Would help Energy and Minerals Group in the realization, which is the US private equity firm backing the IPO
According to Coronado’s Chief Executive Gerry Spindler, the demand is expected to witness a favorable momentum on the back of China, the US as well as Europe. He expects tighter supply picture. The Energy and Minerals Group plans to unload 30% share with respect to Coronado. According to Spindler, this group plans to be major shareholder. The group is optimistic about the outlook for Coronado. After JSW Steel in 2011 and Yancoal in 2012, its time to look out for the next biggest IPO. Coronado’s top management stated that it focuses primarily on the distribution parameter. According to them, the company plans to distribute 60-100% of its FCF or free cash flow. In this regard, the company has projected the FCF of $US 297 million for the current year. In FY2019, the company expects this to reach at $US347 million.
Gerry Spindler has plans to undertake expansion activities at the mine that the company has purchased from Wesfarmers’.
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