The proposed merger, still subject to Cape Alumina shareholder and court approvals, is expected to establish a diversified risk profile with near-term (bauxite) and long-term (thermal coal) project developments.

The deal, anticipated to be effective by late December, would result in an entity with a cash position of $A12 million, a market capitalisation of more than $28 million and no significant debt.

“The immediate priority of the merged company will be to develop Cape Alumina’s bauxite assets on western Cape York, in particular the flagship Pisolite Hills mine and port project near Mapoon, to capitalise on the strong and growing global market for bauxite and to generate a positive cash flow for the company,” MetroCoal chairman Stephen Everett said.

“The merger provides an immediate cash injection from MetroCoal to Cape Alumina, through a $3 million convertible note, which will allow Cape Alumina to progress the technical and environmental studies required for the Pisolite Hills project to gain the necessary government approvals.

“The new entity will continue to advance the Bundi and Columboola coal projects in the Surat Basin in line with the longer-term development opportunity for these assets.

“The new entity’s project development pipeline enables it to benefit from both the strengthening global demand for bauxite, while maintaining its thermal coal resource in preparation for the inevitable upturn in this market,” he said.

Likewise, Cape Alumina chairman George Lloyd said the merger would deliver increased value and returns for shareholders of both companies.

“The merger will provide capital market benefits with a broadened share register and increased liquidity,” Lloyd said.

“The directors of Cape Alumina unanimously recommend that shareholders vote in favour of the merger in the absence of a superior proposal and subject to an independent expert’s opinion that the merger is in the best interests of Cape Alumina shareholders.”

The combined company would hold resources of 202.4 million tonnes of export-grade bauxite and 4.2 billion tonnes of thermal coal.

Shares in MetroCoal jumped 10.3% on the news to 4.3c yesterday while Cape Alumina shares stood at 7c.