PERTH (miningweekly.com) – Coal developer Cockatoo Coal on Thursday announced plans to raise about A$125-million through an accelerated renounceable entitlement offer to fund its Baralaba expansion project, in Queensland.

Under the planned equity raising, shareholders would be entitled to 13.7 new shares for each share held, with an issue price of 0.2c each. Based on the November 12 closing price of the company’s shares, the issue price would represent an 86% discount and a 29% discount to the theoretical ex-rights price.

Cockatoo said the equity raising path was selected following an exhaustive process to evaluate multiple alternatives in order to secure the company’s future, adding that the board believed it provided an appropriate response to the current coal sector challenges, which have placed significant pressure on the company’s financing position.

“The new funding is planned to be sufficient to execute the revised mine development plan, cover all associated transaction costs and sustain the business during a period of forecast depressed coal prices prior to a period of expected substantial growth in the coal market over the next decade,” the company said.

The expansion plan was expected to increase the Baralaba project’s production from one-million tonnes a year to 3.5-million tonnes a year.

Cockatoo has been able to materially reduce the capital requirements of the expansion project from the initial A$311-million estimate to around A$125-million, by realising additional revenue from the sale of noncore assets, coupled with extending the expansion project time lines to more closely reflect current coal demand forecast, thus allowing for a greater contribution from operating cash flows during the construction period.

Further cost savings have also been made through a reduction in required employees by more than 25%.

Meanwhile, Cockatoo and its offtake partner the Noble Group have agreed to a new 28.5-million-tonne offtake agreement, subject to shareholder approval. If Cockatoo shareholders did not approve the offtake deal, the company would be required to pay Noble A$3.5-million.

The company told shareholders that the new offtake agreement with Noble helped to secure the sale of Cockatoos’ future production, and provided greater certainty on the ability to sell the company’s scheduled production for the next 20 years.