If the equity raising, which comprises the issue of 571.6 million shares to Hong Kong and overseas investors is successful Palmer’s coal and iron ore vehicle will be valued at $US7.6 billion and will be the second largest initial public offering on the exchange this year following the $10 billion float of Swiss commodities trader Glencore.
To ensure its success, Palmer plans to pay investment banks – including Bank of China International, HSBC, Royal Bank of Scotland and UBS – fees of up to $HK1.5 billion.
The prospectus indicates the China First coal project in Queensland’s Bowen Basin accounts for the majority of value, with the total expected market value on listing indicating it will be worth about $US5 billion.
Lender China Eximbank has entered a non-binding agreement over the China First coal property with an expiry date of October 31 to provide debt financing for 70% of its estimated $US8 billion price tag, with the balance to be sourced from its initial public offering.
Palmer will retain a 53.59% stake in the company after the float.
Thermal coal production is targeted by December 2014 at a rate of 40 million tonnes per annum over 25 years, but Resourcehouse is yet to secure a mining lease over the property.
Offtake deals have been signed with major customers China Power International Holdings and commodities trader Vitol, with Palmer to receive a 30c per tonne of coal royalty, adjusted quarterly for inflation based on the consumer price index, with a maximum payout of $25 million a year expected during the first three years of operations.
The China First magnetite project in Western Australia’s Pilbara, tipped to achieve first production by the first half of 2014, has a capital cost estimated at $2.7 billion and is expected to deliver up to 12Mtpa of iron products over 25 years.
Shares in Resourcehouse are expected to start trading on June 10.
