An agreed deal for the Houston-based private equity firm Energy and Minerals Group to offload its 51 per cent stake in Coronado Global Resources to Sev.en Global Investments appears to be in doubt, say sources.
Coronado announced in September that subject to regulatory approvals, Czech investor Sev.en was buying a majority stake in the $3bn-plus Australian listed coal miner from The Energy and Minerals Group, which floated the business on the Australian Securities Exchange in 2018.
At the time, Coronado’s shares were trading at between $1.50 and $2 and it was worth more than $3bn.
Shares on Tuesday closed at $1.18 with its market value at $2bn.
Sources say the deal is yet to close, and the pair have a disagreement on price.
Coronado was founded in 2011 by EMG, Garold Spindler and James Campbell. It grew through a series of acquisitions in Australia and the United States, including the Curragh coal mine in Queensland in 2017 for $700m. Coronado floated the following year but on the first day of trade, its share price finished down 10 per cent with its market value at $3.5bn.
It currently produces more than 16 million tonnes of coal and wants to produce 20.5m by 2025.
Since the transaction was announced, the price of metallurgical coal – the type of coal produced by Coronado which is used to make steel – has fallen significantly.
The metallurgical coal price closed at US$141.74 a tonne, down 11 per cent in the past six months.
EMG is always known to be a seller out of Coronado, but the share price of the group has failed to gain strong momentum as institutions broadly shun coal-related equities, and so it has retained its holding.
While on the bourse, the coal price has soared in recent years amid the war between Russia and Ukraine which led to power shortages in Europe, prompting a number of coal companies to make attractive dividend payments due to strong earnings.
Sources say that if a deal falls through, EMG is unlikely to offload its interest via a block trade more broadly across the market.
A more likely outcome is that it waits until the coal price and the share price improves before staging an exit at a price at which it remains comfortable.
The Australian reported at the time that the argument for the acquisition by Sev.en was that the energy transition would take longer than expected, and coal would remain in need.
Sev.en, a family-owned business based in Prague, has moved aggressively to acquire coal mines and coal-fired power plants in its homeland before expanding into Britain and the US. The purchase of the 51 per cent stake in ASX-listed Coronado would be Sev.en’s third major investment in Australia’s fossil fuel industry, headlined by its acquisition of the Vales Point coal power plant – which it said could run longer than previously scheduled.
Coronado entered talks to merge with Peabody Energy in 2022, but the deal never proceeded after Peabody shareholders objected to the terms.
