The long-flagged deal to acquire Donaldson was finally confirmed by Gloucester’s announcement this morning.
Gloucester proposed to acquire full ownership of Donaldson from commodities trader Noble for $585 million.
This includes $360 million of new Gloucester shares to be issued to Noble at $9.75 per share, subject to a 12-month sale restriction on these shares issued.
Gloucester will also take on $225 million of debt, including $186 million of Noble debt and $39 million of debt from an unnamed third party lender.
The Donaldson acquisition will also provide Noble with new marketing arrangements.
In a separate transaction, Gloucester entered an agreement to acquire the Monash thermal and semi-soft coking coal project from Ellemby Holdings and its associated entities.
This deal is for $30 million cash plus an undisclosed number of new converting shares of Gloucester, linked to the achievement of key milestones.
The Monash project covers 22.19 square kilometres near existing Hunter Valley infrastructure.
Gloucester said the project, comprising exploration licences 6123 and 7579, contained about 287 million tonnes of export grade coking and thermal coal.
The company is targeting first coal as early as 2017 and a ramp up to full production of up to 9Mt per annum run of mine in 2022.
Gloucester said the resource had the potential to support a mine life of more than 20 years with a majority of coking coal production.
There is also potential to establish a “large scale underground operation” at the site capable of up to 7Mtpa ROM.
The Gloucester Basin coal miner aims to spend up to $20 million over three years on drilling to prove up reserves at the project, then spend up to $15 million on the work to secure planning approvals and a mining lease.
To fund its acquisition activity, Gloucester plans to raise $230 million at $9 per Gloucester share through a fully underwritten entitlement offer.
Noble already owns a 65.3% stake of Gloucester, but if the Donaldson transaction proceeds this stake is expected to be reduced to 63.4%.
An independent expert also concluded the Donaldson acquisition was fair and reasonable to non-Noble shareholders of Gloucester.
Gloucester shareholders are expected to vote on both transactions at a general meeting scheduled for around July 8.
Donaldson operates its namesake open cut mine in the Hunter Valley along with two bord and pillar underground coal mines, all within 26km of the Port of Newcastle, while it also holds an 11.6% stake of the Newcastle Coal Infrastructure Group consortium.
Gloucester expects the transactions to boost its resource base to 1.512Mt, plus allow for a significant expansion of export capacity through the NCIG terminal.
The company expects its “medium term” annual production to increase from 5.5Mtpa up to 10Mtpa.
Gloucester’s Stratford and Duralie open cut mines are based in the Gloucester Basin of New South Wales and produce semi-hard coking and thermal coal.
The company also owns 47.4% of the Macarthur Coal-led Middlemount project in Queensland’s Bowen Basin.
Second-stage development of the mine is expected to start up mid-year and aims to lift output to 5.4Mtpa run of mine for the next 19 years, while Gloucester can gain another 2.48% of this mine once a shipping milestone is reached.
Gloucester shares remain in a trading halt at $9.90 this morning.
