The timing is excellent: thermal coal prices continue to firm, global electricity consumption is growing, and the weak Australian dollar is delivering local producers the highest steam coal prices in 20 years.
Last week Glencore International launched an initial public offering in Sydney to float its Australian and South African thermal coal assets through newly formed group Enex Resources. The issue is the largest global IPO this year and one of the largest floats ever undertaken in Australia.
Glencore will sell at least 55% of its shareholding in Enex with the indicative price range expected to be around $4 to $5 a share. The offer is expected to raise $2.3 billion, $1.74 billion of which will be paid to Glencore for the acquisition of Duiker, the holding company of Glencore's South African coal assets.
According to coal analyst Clyde Henderson, the deal will deliver a healthy profit: “Glencore purchased the assets for around US$750 million whereas Deutsche now estimates Enex will be valued at about A$4 billion (US$2billion) excluding debt of A$1.4billion.”
Enex produces more than 40 million tonnes of coal a year and is one of the world's largest exporters of thermal coal. Enex is also one of the biggest longwall miners in Australia and owns equity in the South Bulga underground mine, (58.2%), Ulan (90%), West Wallsend (80%), Baal Bone (63.2%), Cumnock (81.2%), United (95%). Enex also has interests in the Togara North deposit and the Cook longwall mine, both in Queensland. Open-cut interests include the Mt Owen (100%), Bulga (58.2%), Ulan (90%), Liddell (67.5) and Westside mines (80%).
(An update on activities at the Ulan longwall mine will be published in the September 2001 edition of Australia’s Longwalls.)
Peter Coates, Enex Resource’s chief executive officer, said Australian investors now had the opportunity to invest in an Australian company that is already making its mark on the world stage.
“With 25 mines across Australia and South Africa and with forecast sales of over $2.3 billion, Enex Resources is a major player in the global thermal coal exporting business,” Coates said.
“Coal is Australia’s largest export product. Enex provides Australian retail investors with the opportunity to invest in an industry and company that will contribute greatly to the economic future of the nation.
“Enex Resources, and its shareholders, are ideally placed to take advantage of the improved market conditions for coal exporters.”
Enex expects demand for thermal coal is estimated to grow by 30% between 2000 and 2005. The company has forecast revenue of $2.37 billion for the 12 months to December 31, 2001, rising to $2.74 billion in 2002. Earnings before interest, tax, depreciation and amortisation (EBITDA) are forecast at $885 million for 2001 rising to $1.2 billion in 2002. Expected dividend yield is between 7.4% and 9.2%.
Coinciding with the IPO release, the McCloskey Group has just released an independent study, called “Enex Resources: A Valuation of Glencore's Australian Coal Assets”, has just been released, by Don Barnett.
The study examines the Australian mines in which Glencore has an interest and values them using a range of discount rates, exchange rates and coal prices. A total of nine valuation scenarios are presented using a coal price range of FOB US$28.5 to US$35.0 with US$/A$ exchange rates ranging from US52c to US65c.
The range of NPVs is from a low of $1.6 billion (low prices, high exchange rate and 20% discount rate) to a high of $7.2 billion (high prices, low exchange rate and 10% discount rate).
The newly announced board includes Ex-AGL chief executi e Len Bleasel and WMC's ex-fctor. Glencore’s representatives of ill be Ivan Glasenberg and Greg James.
The newly announced board includes Ex-AGL chief executive Len Bleasel and WMC's ex-finance director Don Morley. David Karpin is chairman and Peter Coates managing director. Glencore’s representatives on the Board will be Ivan Glasenberg and Greg James.
Enex stands to benefit from its relationship with Glencore, which will receive a US$20 million a year for a market advisory agreement.
“Glencore’s exceptional global network provides our marketing team with the market intelligence they need to optimise the sale of our coal,” Coates said.
See Enex Facts.
