Coal Asia gets SEC nod on P800-M IPO

MANILA, Philippines - Coal Asia Holdings, the holder of the country’s second largest coal reserves, has obtained the Securities and Exchange Commission’s nod to raise P800 million through an initial public offering (IPO) of shares.

Coal Asia Holdings is the parent company of Titan Mining and Energy Corp. (TMEC), which owns mining exploration and development rights in some 13,000 hectares in Davao Oriental and Zamboanga Sibugay, believed to have total potential coal resource of 120 million metric tons (MMT).   

 Based on its registration statement, Coal Asia plans to sell 800 million new common shares at par value of P1.

The offer price was determined after considering the financial requirements of the company and the inputs from various shareholders.

Abacus Capital & Investment Corp. was tapped as the sole issue manager and underwriter.

Proceeds from the IPO will be used for further exploration work for both the Davao Oriental and Zamboanga Sibugay projects, and working capital requirements.

Coal Asia aims to bring the Davao mine into production by 2014 and its Zamboanga mine by 2015 to capitalize on the anticipated huge demand for coal from energy producers racing to put up their energy generating plants in power-strapped Mindanao.

Power supply in Mindanao remains low, prompting the government to push for the construction of additional power plants to augment the power requirement of the Mindanao power grid.

Mindanao’s power demand is expected to grow at an annual rate of 4.6 percent from 2011 to 2030. The Philippines is estimated to have total coal resource potential of 3.53 billion tons, mainly thermal coal used for power generation.

Domestic annual demand for coal is 12 MMT with the power sector cornering the lion’s share of the output. Cement manufacturers are also coal users, accounting for 2.3 MMT of total annual requirement.

Coal Asia more than doubled its net profit last year to P4.91 million from P2.03 million on the back of a 63 percent jump in sales to P21.84 million.

As of end-June this year, Coal Asia’s assets stood at P3.28 billion, 95.55 percent of which comprise coal reserves amounting to P3.13 billion.

Coal Asia, which has the potential to become the biggest producer of high-grade bituminous coal, is on track to begin commercial production of 600,000 metric tons of high-grade coal per year beginning 2014.

A recent preliminary feasibility study on a 7,000-hectare area in Davao concluded the economic viability of the site with an observable coal reserves yield factor of 28,000 tons per hectare which translates to an estimated market value of P23.8 billion.

To further expand operations, Coal Asia has secured off-take contracts both here and abroad which include India, Japan, Taiwan, Hong Kong and Vietnam.