The deal, due to be completed in early January next year, will see Ausmet take full control of Bounty Materials Handling, a mechanical engineering business specialising in materials handling machinery particularly in the coal mining industry, and Thin Seam Mining Services, a thin and thick seam coal mining equipment leasing company.

Ausmet will also acquire a 25% stake with a right to acquire up to 51% in the next 12 months of TSM Corporation, to be renamed In Coal; a thin and thick seam contract coal mining company.

"This deal provides Ausmet shareholders with upside exposure to coking coal, one of the strongest performing commodities in the resources sector; the benefits of a much stronger balance sheet backed by hard assets; significant upside to the share valuation should the business perform as budgeted; and substantial leverage to new, thin seam mining techniques on the Australian coal mining scene," Ausmet chairman Howard Dawson said.

The mining of thin coal seams, which are typically high grade coking coal seams, is expected to assume increasing importance within the Australian coal industry as thicker coal seams deteriorate in quality, he said.

"Ausmet shareholders will benefit from the growing demand for coking coal without the direct risk or exposure to mine ownership or management.”

The acquisition will see Ausmet issue approximately 70 million shares, at a deemed price of 20¢ each, and 35 million unlisted options in the company to Bounty shareholders.

Significantly, Bounty directors have a strong incentive to perform since the option package they receive as shareholders requires them to more than double the current share price before they can benefit financially.

Bounty is confident that existing contracts will provide for annualised revenues to exceed $70 million within the next 2½ years, with around $6 million in after tax profits budgeted for the next financial year, Dawson said.

Bounty currently supplies a wide range of industrial equipment and parts covering lifting equipment, hoses and hydraulics, safety, welding and hire equipment. It also provides services and equipment for drive heads, conveyors, man-cars, feeder breakers, belt storage systems, pulleys and laser aligning.

Through its Bounty (FOX) International arm the company supplies mechanical and structural components for FOX conveying systems and performs maintenance on the systems.