Tigers Realm scales back

WEAK equity market conditions have forced Owen Hegarty's Tigers Realm Coal (TRC) to scale back its offering despite continuing strength of coking coal prices.

By InvestSMART · 26 Jul 2011

By InvestSMART ·
26 Jul 2011

Comments

WEAK equity market conditions have forced Owen Hegarty's Tigers Realm Coal (TRC) to scale back its offering despite continuing strength of coking coal prices.

The Melbourne-based company would not comment on the size of the scale-back and its repricing. But the latest term sheets show what was originally promoted as a $200-250 million float is now a $30-45 million offering at a reduced price of 60? a share.

Tigers Realm is the first of the commodity specific spinoffs planned by the privately held Tigers Realm Minerals, a group of former Oxiana/OZ Minerals senior managers, including the bustling Mr Hegarty.

Poor equity market sentiment towards floats is the likely cause of the scale-back. Late last month the planned $500 million float of underground contract miner Barminco was pulled because of poor sentiment.

At the lower raising of $30 million, TRC would have a market capitalisation of $202 million, with the float representing about 15 per cent of the company. It is assumed TRC will use the funds to advance its overseas coking coal properties before returning at a later date for development funding.

Unlike iron ore, there is a scarcity of high-quality coking coal development opportunities. That has been reflected in recent pricing of $US295 a tonne for premium hard coking coal, a key ingredient in steel.

TRC was created soon after the financial crisis hit in 2008 with the aim of assembling a portfolio of Pacific Rim coking coal development projects. It recently increased its total stock exchange compliant resource base to 198 million tonnes of coking coal.

Go to Google News, then click "Follow" button to add us.

Share this article and show your support

Frequently Asked Questions about this Article…

Why has Tigers Realm Coal (TRC) scaled back its planned float?

Tigers Realm Coal scaled back its planned float mainly because of weak equity market conditions and poor sentiment toward new listings. The article notes that despite strong coking coal prices, market weakness — similar to the environment that forced Barminco to pull its planned $500 million float — made a smaller, repriced offering more likely.

How much was TRC’s float reduced by and what are the new offering sizes?

Term sheets showed the original plan for a $200–250 million float was reduced to a $30–45 million offering. The company would not comment on the exact size of the scale-back or the final repricing, but the public term sheets reflect the much smaller range.

What would TRC’s market capitalisation and float percentage be at the lower raising?

At the lower raising of $30 million, TRC would have a market capitalisation of about $202 million, and the float would represent roughly 15% of the company, according to the article.

How will Tigers Realm Coal likely use the funds from the smaller offering?

The article says TRC is assumed to use the funds to advance its overseas coking coal properties, with the plan to return at a later date to raise development funding once projects are further advanced.

What do current coking coal prices mean for Tigers Realm Coal and investors?

The article highlights a scarcity of high-quality coking coal and cites recent pricing of about US$295 a tonne for premium hard coking coal. For investors, that scarcity and high pricing can support the value of coking-coal development assets like TRC’s, but market sentiment for equity listings can still delay or reduce public raisings.

Who is behind Tigers Realm Coal and what is the company’s background?

Tigers Realm Coal is the first commodity-specific spinoff from the privately held Tigers Realm Minerals, a group led by former Oxiana/OZ Minerals senior managers including Owen Hegarty. TRC was created soon after the 2008 financial crisis to assemble a portfolio of Pacific Rim coking coal development projects.

What is TRC’s resource position and project focus?

TRC has been assembling Pacific Rim coking coal development projects and has recently increased its total stock-exchange-compliant resource base to 198 million tonnes of coking coal, according to the article.

Does the scale-back mean TRC’s development plans are cancelled?

No — the article indicates the scale-back reflects current market conditions for equity raisings, not abandonment of project plans. TRC is expected to use the smaller raise to advance its overseas properties and then return later for development funding when market conditions improve.