Geo Energy has signed a life-of-mine coal offtake agreement with EP Resources. The latter, which is part of large European energy group, EPH group, has committed to offtake 75% to 85% of export volumes of Triaryani coal. This is limited to up to 12 million tonnes of coal per annum for the life of the mine and priced at an index-linked price less the offtake margin.
The coal offtake is for the supply of coal for Geo Energy’s subsidiary, TRA coal mine, which the former acquired on Oct 18, 2023.
EP Resources will make a standby prepayment facility for the coal offtake of up to US$20 million ($26.9 million).
Together with the offtake deal, private commodities investment company, Resource Invest AG (ResInvest), intends to invest US$35 million in the shares of Geo Energy by March 31, 2026. This will be done through market purchases as well as directly from the company. Most of the investment is intended to be completed within eight weeks.
The investment by Resource Invest includes buying US$10 million of Geo Energy’s treasury shares in two equal tranches at the placement prices of 45 cents per share and 50 cents per share. The purchases are expected to take place in February 2024 and February 2025.
According to Geo Energy, the placement prices, compared to the average share buyback price of 31 cents apiece, reflect “significant” premiums of 14 cents to 19 cents per share, or a premium of 45% to 61%.
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Geo Energy will also issue 41.4 million non-listed, transferable and free warrants to ResInvest. The warrants, to be subscribed in two tranches, are exercisable within three years from their respective dates of issue.
Each warrant carries the right to subscribe for one new ordinary share in Geo Energy at an exercise price of 55 cents per warrant share for the first tranche warrants and $1 per warrant share for the second tranche warrants.
According to Geo Energy, the sale of its treasury shares will bring about $13.4 million for the company.
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There will also be a three-year moratorium for ResInvest and the two largest existing shareholders of the company until Dec 31, 2026. ResInvest will also need to maintain an equity stake of at least 5.5% in Geo Energy.
Both deals are expected to boost Geo Energy’s working capital.
“Following the acquisition of TRA, we have received numerous competing offers interested in the offtake of TRA coal especially due to its attractive coal specifications (low ash and low sulphur) that commands a premium above market price. EP Resources, part of one of the largest energy groups in Europe, was selected to develop markets for TRA coal based on their scale and international presence as well as its expertise and experience,” says Charles Antonny Melati, executive chairman and CEO of Geo Energy.
“We are also proud to welcome EPH group to Geo’s family as a long-term business partner, ahead of these exciting times. EPH group’s partnership with Geo Energy is a strong testament to our value and growth potential and is a significant milestone for our group.”
“With EP Resources on board, we are well placed to achieve greater heights, affirm our position as one of the biggest Indonesian coal companies and realise our vision of bringing Geo Energy into a billion-dollar business,” he adds.
Shares in Geo Energy closed flat at 39.5 cents on Feb 7.
