The Asia Miner

JUN 2018

The ASIA Miner - Reporting Important Issues to Mining Companies in the Asia Pacific Region

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the asia miner • volume 15 • issue 2 16 REGIONAL FOCUS: Indonesia As part of its coal exit, Rio Tinto has entered into a binding agreement with a consorƟum comprising private equity manager EMR Capital (EMR) and PT Adaro Energy Tbk (Adaro), an Indonesian listed coal company, for the sale of its enƟre 80% interest in the Kestrel underground coal mine in Queensland, Australia, for $2.25 billion. Rio Tinto chief execuƟve J-S Jacques said that the sale of Kestrel, combined with the announced divestments of Hail Creek and Rio Tinto's undeveloped coal projects, delivers excepƟonal value to shareholders. The transacƟon is subject to customary condiƟons precedent being saƟsfied, including the receipt of regulatory approvals from Australia's Foreign Investment Review Board and the Queensland Government. Subject to all regulatory approvals and other condiƟons precedent being saƟsfied, compleƟon is expected to occur in the second half of 2018. It will bring the total amount achieved from the recent divestments of Rio Tinto's Queensland coal assets to $4.15 billion, with the funds to be used for general corporate purposes. EMR and Adaro will jointly manage and operate Kestrel, leveraging EMR's experience in acquiring and operaƟng mining operaƟons as well as Adaro's wealth of sector experƟse as an experienced coal producer. Jason Chang, Chief ExecuƟve Officer of EMR, said, "We are pleased to announce this milestone transacƟon, which represents a once in a generaƟon opportunity. I am excited about the experƟse that EMR and Adaro can bring to these operaƟons. "Coking coal is one of our four core commodiƟes and it offers excellent demand and supply fundamentals for decades into the future." Garibaldi Thohir, Chief ExecuƟve Officer of Adaro, agreed that the acquisiƟon of the Kestrel mine was a significant milestone. "This is one of our largest investments outside of Indonesia. We are thrilled at the growth which this transacƟon will bring and look forward to working closely with EMR in making this venture a resounding success." The Kestrel mine is located in the Bowen Basin, 40km north-east of Emerald in central Queensland, Australia. Kestrel employs longwall mining to produce high quality coking and thermal coal products for export markets. In 2017, the Kestrel mine produced 5.1 million tonnes of saleable coal, comprising 4.25 million tonnes of hard coking coal and 0.84 million tonnes of thermal coal. Gulf Manganese CorporaƟon has secured approximately A$15 million equivalent funding led by Indonesian-based diversified investment group PT Jayatama Tekno Sejahtera (PT JTS). PT Gulf Mangan Grup (PT Gulf) will issue a converƟble note, in an Indonesian Rp ("DR) principal amount equivalent to approximately A$6 million, with a zero percent interest to PT JTS's wholly-owned subsidiary, PT Jayatama Global IvesƟndo (PT JGI) Upon saƟsfacƟon of the agreed condiƟons precedent, the PT Gulf ConverƟble Note will automaƟcally be converted in 25.1% of the equity of PT Gulf. An addiƟonal standby facility, in an IDR principal amount equivalent to approximately A$7 million, has also been made available by PT JTS to PT Gulf. The securing of this funding package enables Gulf to complete the construcƟon and commissioning of the first two smelters at the Company's Kupang SmelƟng Hub Facility in West Timor. Gulf anƟcipates commencing ferromanganese alloy producƟon by mid-2018, at which point the Company expects to be iniƟally producing approximately 30,000 tonnes per annum premium quality ferromanganese alloy. Chairman and CEO of PT JTS, Bpk Fofo Sariaatmadja commented, "We are excited to be part of the Gulf team and look forward to working together with the team to bring the smelters to full producƟon and beyond. We believe the potenƟal of this Company to benefit both Gulf shareholders and members of the local Kupang community is immense, and we will do what we can to help the Company realise that potenƟal." Gulf's Managing Director, Hamish Bohannan concurs that this a "game-changing transacƟon for Gulf". "The Board is very pleased to have aƩracted a highly- respected Indonesian partner such as PT JTS, as it now provides the Company with a very clear and defined pathway through to producƟon this year. "PT JTS completed a very thorough and extensive due diligence process and its willingness to invest in Gulf is a strong validaƟon of our near-term plans and future vision for the establishment of this regionally significant manganese smelƟng facility in West Timor. "With all relevant approvals and funding now in place, we are entering a very exciƟng period where we expect considerable shareholder value to be unlocked over coming months." Gulf secures A$15 million to advance Kupang Smelting Hub Facility Rio Tinto's Kestrel Mine, Queensland, Australia. Image: ©Rio Tinto PT Adaro and EMR acquire Kestrel for $2.25 billion

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