Two days before Christmas, White exercised an option to acquire Cascade with a largely scrip-based $486 million offer.
Due diligence has since been completed, with White executing definitive transaction agreements which are subject to shareholder approval.
An independent board committee (IBC) established to investigate the deal confirmed the “superior nature” of the Mt Penny project compared to recent project transactions, especially given its scope and advanced stage of development.
Located about 60 kilometres northeast of Mudgee and with a 235km rail journey to Newcastle’s port, some 102.6 million tonnes of the project’s 173.7Mt of resources are classified as probable coal reserves.
Cascade’s conceptual plans were aiming for 3.8Mt per annum of export-quality thermal coal production starting in 2013, with potential to ramp up to 6.5Mtpa by 2018.
White, led by the senior management which built up Felix Resources, also found the mining lease application and other regulatory approvals for the project were “tracking to plan”
The company noted last year that Cascade had “secured all necessary land and water rights” to develop the project and was confident of gaining 3.5-4Mtpa of port capacity.
“Quality open cut coal mining projects in New South Wales do not regularly come to market because they are very highly prized, even more so in recent times given strong thermal coal prices,” IBC chairman Graham Cubbin said.
“White Energy’s highly experienced management team has a track record of delivering successful coal projects on time and on budget.
“The acquisition of Cascade will provide a great opportunity for our management team to use its expertise to generate value for White Energy.”
The Mt Penny project tenement EL7406 is next to the Bylong project, which Anglo American sold to Korean electricity generator KEPCO (70%) and Cockatoo Coal (30%) last year.
Cascade, which is not to be confused with the Cascade Coal subsidiary of Galilee Energy, also owns the Glendon Brook semi-soft coking coal project 12km east of Singleton in the Hunter Valley.
Few details about this project in tenement EL7405 have yet been released by White.
An Australian Financial Review investigation of Cascade in early December found that five White directors were each 12% shareholders of the company, including ex-Felix duo Brian Flannery and Travers Duncan.
Other Cascade directors reportedly are Rams Home Loan founder John Kinghorn and his fellow Krispy Kreme investors John Atkinson and John McGuigan. The Australian arm of the doughnut maker collapsed in November.
Investment house Arthur Phillip investor Richard Poole owns 12% of Cascade while 28% of the company is held by clients of this firm and Southern Cross Equities, according to the AFR report.
The family company of former NSW minerals resources minister Eddie Obeid reportedly owns a property in the Mt Penny project area.
More details about the Cascade transaction are expected to be released in late February with a White shareholder meeting expected in late March or early April.
White will issue up to 138.86 million fully paid ordinary shares under the deal at a price “being the lesser” of $3.85 each and its volume-weighted average price for the 15 trading days before the transaction is complete.
The cash component will be $41 million.
White was known for its coal upgrading technology before Flannery and Duncan took executive roles in the company after its merger with Felix spin-off South Australian Coal.
Flannery, Duncan and Kinghorn formed the nucleus of the Felix group that was officially sold to Yanzhou Coal Mining for $3.5 billion in early 2010.
Flannery is also the managing director of Yanzhou subsidiary Yancoal Australia, and pocketed more than $500 million from the takeover of Felix.
White shares closed up 11c to $3.16 yesterday.
