Cascade owns a 173.7 million tonne JORC-compliant thermal coal resource at Mt Penny in the Western coalfields, which has shallow cover suitable for open cut development, and a semi-soft coking coal development area at Glendon Brook in the Hunter Valley.
White Energy’s position as an emerging mid-tier company with its coal upgrading technology, South Australian coal resource, highly regarded management team and strong balance sheet, will be further strengthened by the acquisition of Cascade’s two NSW development assets if the transaction proceeds, chairman Travers Duncan said.
“Cascade has two promising coal assets,” he said. “In particular, Mt Penny is a very exciting development property given its coal quality and unique infrastructure advantages.
“Because of the close involvement of a number of Cascade shareholders with White Energy, Cascade decided to offer White Energy the opportunity of owning and developing Cascades assets.”
Flannery and fellow White Energy directors Duncan and John Kinghorn have made a tidy $45 million profit since the company raised funds to pay for its merger with South Australian Coal.
The trio formed the nucleus of the Felix group that was sold to Yanzhou Coal Mining for $3.5 billion earlier this year. Flannery is also the managing director of Yanzhou subsidiary Yancoal Australia, and pocketed more than $500 million from the takeover of Felix.
Mt Penny is anticipated to commence production in 2013, with its conceptual development plan having recently been approved.
Cascade has secured all necessary land and water rights to develop Mt Penny’s first open cut pit and infrastructure, and is confident it can access sufficient port capacity to enable it to sell the annual estimated saleable production from its first pit of 3.5-4Mt.
Mt Penny has distinct infrastructure advantages with the Sandy Hollow-Ulan railway passing directly through its northern boundary. The rail allows for direct access to the Port of Newcastle and secondary rail access to Port Kembla.
Cascade started exploration at Glendon Brook in September with a 263-metre deep, fully cored stratigraphical hole in the central steep dipping zone of the tenement. This hole was located updip of earlier exploration holes drilled by the previous operator, HWE.
A total of 22 ply samples ranging from 0.3m to 2.1m thick were recovered from this borehole from what is believed to be the Foybrook formation. Testwork on composite samples is in progress.
This testhole along with the seven boreholes previously drilled at Glendon Brook have all intersected coal at depths ranging from 11m to about 300m, with cumulative coal thicknesses between 6.5m and 26m.
Based on the exploration activity carried out by Cascade to date and previous work undertaken, Glendon Brook has the potential to host a semi-soft coking coal exploration target in the order of 50Mt.
The potential quantity and grade is still conceptual in nature.
Cascade has offered White Energy the exclusive right to acquire 100% of Cascade plus assumed liabilities of $14 million. The two companies have entered into a free 28-day option and exclusivity agreement to give White Energy time to fully evaluate the opportunity.
If White Energy acquires Cascade it will pay $41 million in cash, with the balance of the $486 million paid in White Energy ordinary shares.
White Energy will fund all cash components out of existing cash reserves and has no intention of raising capital (either equity or debt) to fund any aspect of this transaction.
“The option arrangement provides White Energy with the first opportunity to acquire Cascade, but without any obligation on White Energy,” Duncan said.
“In the event that the independent directors of White Energy decide against proceeding with the acquisition, then the Cascade owners will be free to develop the assets independently.”