INDONESIAN coal producer Geo Energy Resources will be receiving an investment of US$35 million from private commodities investment company, ResInvest, for at least 5.5 per cent of its equity.
Out of the US$35 million, US$25 million will be for the purchase of ordinary shares in the company either through the market or directly from the company. The intention is for US$20 million to be injected into the company within eight weeks of the announcement, which was made on Wednesday (Feb 7) through an Singapore Exchange filing.
Another US$5 million will be invested over a longer timeframe, with the investment expected to be completed by Mar 31, 2026.
The deal also includes purchasing US$10 million of the company’s treasury shares in two equal tranches at the placement prices of S$0.45 per share and S$0.50 per share. These are expected to take place in February 2024 and February 2025.
Compared to the average share buyback price of S$0.31, these placement prices reflect premiums of between 45 per cent and 61 per cent.
Geo Energy Resources will also issue over 41 million non-listed and transferable free warrants to RestInvest as part of the deal.
The warrants would be issued in two tranches and are exercisable within three years from the date they are issued.
Each warrant carries the right for ResInvest to subscribe for one new ordinary share in Geo Energy at S$0.55 per warrant share for the first tranche and S$1.00 per warrant share for the second tranche.
Geo Energy said it will raise approximately S$13.4 million through the sale of its treasury shares, providing further capital for its ongoing growth plans and working capital to unlock core asset value.
There will also be a three-year moratorium for ResInvest and Geo Energy’s two largest existing shareholders until Dec 31, 2026. After this, ResInvest is to maintain at least 5.5 per cent equity stake in the company.
In the same bourse filing, Geo Energy also said that it has secured a life-of-mine coal offtake agreement with EP Resources, a commodities trading house that is part of European energy company EPH Group.
The agreement will have TRA coal mine – which Geo Energy acquired in October 2023 – supply coal to EP Resources, a commodities trading house part of European energy company EPH group.
TRA will supply between 75 and 85 per cent of its export volumes to EP Resources, with a cap of 12 million tonnes per annum. It will be priced at an index-linked price less the offtake margin
EP Resources will set up a standby prepayment facility of up to US$20 million for the coal offtake, which Geo Energy said would boost its working capital and cash position.
Charles Antonny Melati, executive chairman and chief executive officer of Geo Energy, said that the company had received numerous competing offers for the offtake of TRA coal after its acquisition due to its attractive coal specifications that commands a premium above market price.
He added that EP Resources was selected to develop markets for TRA coal based on its scale and international presence as well as its expertise and experience.
Shares of Geo Energy Resources closed flat at S$0.40 on Wednesday.
