BRISBANE COAL COMPANIES ON BRINK OF LARGE SCALE MERGER

Written on the 21 March 2011

BRISBANE COAL COMPANIES ON BRINK OF LARGE SCALE MERGER

SHAREHOLDER approval is the last obstacle for listed Brisbane coal miner Lodestone Energy Limited (ASX: LOD) to acquire junior explorer Coalbank Pty Ltd and create one of Australia’s largest coal exploration footprints.

Lodestone has secured the right to acquire Coalbank, founded by Lodestone director Greg Baynton and fully owned by Lodestone’s biggest shareholder Allegro Capital Nominees.

Baynton is also a director of Allegro and would become executive deputy chairman of the merged company if the deal is approved by shareholders.

In addition, Lodestone is seeking to change its name to Coalbank Limited in order to better reflect its refined focus on the coal industry. Combining Coalbank’s three prospective exploration projects with Lodestone’s permits will cover 24,000 square kilometres in central and south-east Queensland.

In a statement to the ASX, Lodestone chairman Roger Clarke says the Coalbank projects both complemented and added diversity to Lodestone’s existing coal exploration portfolio.

“By combining Coalbank and Lodestone we will achieve one of the largest and more diversified coal exploration footprints in Queensland,” he says.

“Some of the benefits of the acquisition include new alternatives for transport infrastructure, possibilities to mitigate the impact of weather conditions and ultimately, the potential for diversity of coal qualities and markets.

“This transaction is also consistent with our intensifying focus on coal while we undertake measures to partner or monetize our mineral projects and our Queensland petroleum exploration subsidiary, Surat Gas Pty Limited.”

The Coalbank projects require minimum annual expenditures totalling $1.7 million over three years, and would join Lodestone’s portfolio of large-scale operations Tambo Coal Project, Chinchilla East and Moreton Energy.

The success-based structure of the proposed acquisition means Coalbank would be paid in the form of 40 million Lodestone shares over the next three years if a minimum of 100Mt of coal is extracted from the three Coalbank projects.

Lodestone, which has a market capitalisation of $44.8 million, will seek shareholder approval for the acquisition and renaming at an upcoming extraordinary general meeting to be held ‘as soon as practicable’.

LOD shares are trading at around 6 cents.


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