Sultan Mining postpones IPO

Due to bearish market conditions, Sultan Mining & Energy Development Corp. has postponed indefinitely its planned P480-million initial public offering (IPO), deciding instead to explore other options to raise cash for its capital requirements.

In a statement issued yesterday, Sultan Mining said the decision was arrived at in consultation with its IPO underwriter, Asian Alliance Investment Corp. 

Sultan Mining earlier planned to defer its IPO until the end of the month to allow it to present its operating results for the first half of this year.

“Despite the company’s performance over the first half of 2008 and the expectation of significant improvement over the near term, we feel that the present market volatility will inevitably affect the company’s share price to the detriment of existing shareholders and IPO investors,” Asian Alliance said.

Asian Alliance, however, said Sultan Mining remains interested in listing its shares on the Philippine Stock Exchange and is planning to do so when market conditions stabilize.

To ensure that its ongoing expansion program will proceed smoothly, Sultan Mining has authorized Asian Alliance to explore other means of raising funds.

Proceeds from the IPO would have been used to partly fund 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

In documents earlier filed with securities regulators, Sultan Mining said it would need P200 million to fund capital expenditures and another P145 million for its working capital requirements.

Sultan Mining has secured a contract to supply a total of  90,000 metric tons of  coal to Switzerland’s Glencore International AG, one the world’s largest suppliers of commodities and raw materials.

Glencore is the first to seal a supply contract with Sultan Mining among several prospective foreign buyers that have expressed strong interest in buying Sultan’s Bislig coal.

In the first half this year, Sultan Mining reported a net income of P28.6 million on revenues of P164 million.  Sales are expected to continue growing for the rest of the year with the expansion of its operations to meet the demand for coal.

The continued rise in oil and gas prices has prompted an increasing number of companies throughout the Asia-Pacific region to rely more on coal as a source of power supply.  Also contributing to the increased demand for coal is rapid industrialization in China and India and new coal-fired power plants coming online in Europe and the United States.