Sultan Mining to proceed with  P480-M IPO

Sultan Mining & Energy Development Corp. (SMEDC), a local coal mining and trading company, is optimistic it could push through with its P480-million initial public offering (IPO) after it has secured a registration statement from the Securities and Exchange Commission.

SMEDC vice chairman Rufino Bomasang said the company is bullish on the public offering amid continuing confidence of investors on the prospects of coal stocks despite challenging market conditions.

SMEDC vice president for sales Michael Morales said share prices of coal companies overseas continue to outperform the global markets as the surging price of coal has outpaced crude oil and natural gas due to a spike in demand as global electricity demand grows.

Bomasang said coal prices may even double this year as supply has been threatened by crippling China snowstorms, floods in mines in Queensland, Australia and slower growth in Indonesian output. On the domestic front, the Philippines continues to import huge amounts of coal to fuel its power plants since local supply has been largely inadequate.

To meet growing demand and take advantage of surging prices, SMEDC is ramping up production in its mine in Bislig, Surigao del Sur to at least 300,000 metric tons this year from less than 20,000 MT last year.

The firm’s Bislig coal mine is now in full commercial production after fresh investments were infused to bring in more heavy equipment so it can simultaneously develop and operate several open pits to dig up surface coal.

SMEDC senior vice president for operations Ricardo Basallo Jr. said production volume will steadily increase once additional open pits come on stream with the help of expansion efforts financed by fresh funds the company – will raise from its planned IPO.

SMEDC is offering 480 million new common shares at their par value of one peso per share to domestic investors. The offer shares will be equivalent to 33.5 percent of SMEDC’s outstanding capital after the IPO.

The coal company has tapped Asian Alliance Investment Corp. as lead underwriter for the IPO.

SMEDC shareholder Maxinvent Trading Corp. has also granted Asian Alliance an option to purchase or place up to 48 million SMEDC shares, representing 10 percent of the offer, for the purpose of covering over-allotments.

Net offer proceeds will be used by the coal and energy firm to partially finance its capital expenditures related to additional exploration of its coal operating contract (COC) areas, improvements and expansion of coal extraction and processing facilities, to pay existing bank obligations and to finance working capital requirements.

SMEDC reported record production and sales volumes from its Surigao del Sur coal mine with April output already exceeding figures for the entire first quarter of the year.

“For April alone, the production volume of 22,000 metric tons was a 120-percent increase from the previous month. It was also greater than the first quarter’s production for 2008,” SMEDC chief finance officer Anthony Buyawe said.