Under the deal to create a “leading independent” metallurgical coal producer, Cockatoo will issue two new ordinary shares for each share of Blackwood.

In recommending the offer, Blackwood said it represented a 35% premium to its closing price on Wednesday.

It added that major shareholder Noble Group (51.2%) had already agreed to sell its entire Blackwood shareholding.

Blackwood said the offer was conditional on a minimum of 52.1% acceptance and successful completion of Cockatoo’s recent capital raising.

At this stage the bidder and target statements are expected to be made in late November while Blackwood expects the offer to close in late December.

Cockatoo’s capital raising spree

To repay its existing $A95 million loan facility and finance expansion efforts, Cockatoo has lined up $153 million of share placements, will unleash a separate share purchase plan for retail investors and landed a $255 million secured project facility underwritten by ANZ.

The $152 million equity raising comprises a $50 million placement to its major Korean shareholder SK Networks at 50c per share, a $43 million placement to Noble at 50c per share and a $60 million placement to sophisticated investors at 45c per share led by a minimum $20 million commitment from Indonesian coal miner Harum Energy.

While a similarly priced SPP depends on shareholder approval of the $152 million equity raising and its subsequent completion, Cockatoo’s ANZ-underwritten finance facility is subject to various conditions.

It includes repaying Korea Exchange Bank’s $95 million loan facility, with the bank last month extending the facility’s maturity to December 27.

Other conditions include regulatory approval for Cockatoo to expand the Baralaba surface coal mine to 3.5 million tonnes per annum, with the Queensland government recently agreeing to a 1Mtpa expansion, plus Cockatoo entering offtake agreements for at least 75% of the mine’s output.

Cockatoo said it was confident of receiving environmental approvals required for the 3.5Mtpa expansion in time to take part in the 27Mtpa of stage 1 export capacity of the Wiggins Islands coal export terminal, due in 2014.

Separately, Cockatoo said it intended to seek proposals from potential investors to provide a mezzanine financing facility of $50 million and it had already received expressions of interest including from commodities trader Noble.

The institutional bookbuild for Cockatoo’s equity raising is expected to close on October 22, while the meeting to approve it and its possible allotment is pencilled in for mid-December.

Details of the proposed SPP are expected to be mailed out in late October with the offer expected to close around mid-December too.

Blackwood background

The junior has long held an exploration target of 5-6.9 billion tonnes of coal resources across its projects in Queensland’s established Bowen, Surat, Clarence-Moreton and unexploited Galilee basins.

However, in September it made progress in establishing resources with maiden inferred resources of 322Mt set at its South Pentland project in the Galilee Basin and 51.8Mt set at the Taroom project in the Surat Basin.

Blackwood also struck shallow coal of pulverised coal injection-metallurgical quality through a scout drilling program at its Dingo project in the Bowen Basin last month.

The project is west of Cockatoo’s Dingo project and located 30km northwest of the Baralaba mine.

Former coal tycoon Tinkler was once interested in capturing a stake of Blackwood but the $28.4 million share placement struck by his company Mulsanne Resources fell through earlier this year with Tinkler paying Blackwood $12 million as part of a legal settlement in late June.