Blumont Group buying 15% stake in coal miner Resource Generation

Blumont Group has made another foray into coal mining, announcing yesterday a move to take a 15 per cent interest in Resource Generation Limited (RES) - a coal-miner in which Noble Group also has a stake - for up to A$22.11 million.

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Blumont Group buying 15% stake in coal miner Resource Generation

Mindy Tan
17 September 2013

Blumont Group has made another foray into coal mining, announcing yesterday a move to take a 15 per cent interest in Resource Generation Limited (RES) - a coal-miner in which Noble Group also has a stake - for up to A$22.11 million.

As part of its strategy to become a company with multiple and diversified mineral resource and energy assets, Blumont plans to pump between A$20.97 million and A$22.11 million into RES for new shares at A$0.22 apiece that will give it a 15 per cent stake in the enlarged capital of RES, which is listed on both the Australian Securities Exchange (ASX) and the Johannesburg Stock Exchange.

Proceeds from the exercise will be used to develop RES’s Boikarabelo coal mine located in the Waterberg region of South Africa, which has probable reserves of 744.8 million tonnes and existing gross resources of 6.4 billion tonnes. Blumont is funding the investment from internal resources.

“We are strengthening our earlier entrance into the thermal coal space. We foresee that the Waterberg Boikarabelo coal mine will be the centrepiece in our global thermal strategy,” Neo Kim Hock, Blumont’s executive chairman, said, noting that the acquisition would give Blumont an opportunity to be involved in a world-class thermal coal play in one of the few big-scale thermal coal projects left outside China.

Noteworthy, too, is RES’s strategic partnership with Noble Group, he said.

As an anchor investor, Noble has a 12.85 per cent stake in RES as at September 2013. The terms of the partnership include a 35-year off-take agreement where RES would supply Noble with 500,000 tonnes of coal per year over the first eight years, a further 1.5 million tonnes per year over years nine to 12, some two million tonnes per year between years 13 and 14, and some 2.5 million tonnes a year from years 15 to 35.

Since December last year, Blumont has been pursuing opportunities in the mineral and energy resources sector as part of a strategy to become a company with multiple and diversified assets in this segment.

RES is Blumont’s second investment in the thermal coal sector. The first was in March when the group took a 11.5 per cent stake in ASX-listed Celsius Coal, a coal explorer focused on developing coking and thermal coal deposits in the Kyrgyz Republic.

In July 2013, the group entered into a conditional agreement to acquire a 12.75 per cent stake in the enlarged capital of ASX-listed Cokal Limited. The latter focuses on high-margin metallurgical coal and has interests in coal exploration tenements in Kalimantan, Indonesia and Tanzania.

Blumont shares closed trading down a cent at $1.96 yesterday.

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