Coal and gold miner Golden Energy and Resources, which is being privatized by its controlling shareholders, has reported FY2022 earnings of US$771 million, up 522.4% over the preceding year ended Dec 2021.
Revenue in the same period was up 199.7% to US$5.6 billion, led by higher selling prices of coal.
Under a deal first announced last November, GEAR has announced a plan do a distribution-in-specie of its shares in its 62.5%-owned, Jakarta-listed Golden Energy Mines to its shareholders.
In connection with the distribution, GEAR’s minority shareholders will then receive a privatization offer by the controlling Widjaja family.
GEAR’s minority shareholders can choose to take a mix of Golden Energy Mines shares, quoted in rupiah, plus cash. This combination, based on GEM’s traded price when the deal was announced last November, is worth $1.045. Or, they can choose an all-cash offer at 84.6 cents.
This deal – the latest in a spate of privatization offers in recent years – has attracted the attention of SGX RegCo.
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On Feb 24, the frontline market regulator told the board of GEAR to make sure that W Capital, the independent financial adviser (IFA) appointed for the deal, looks at both the terms of the distribution plus cash offer, as well as the all-cash offer.
Besides its 62.5% stake in GEM, GEAR holds a 64% stake in Stanmore Resources, an Australian producer of coal used to refine steel, whose share price has gained by around a third since the deal was announced.
There’s also a 50% stake in Ravenswood Gold, a privately-held gold miner.
“If there are any material changes to the traded price of the company’s component assets that have taken place since the announcements, the IFA should consider these changes,” SGX RegCo says, adding that it reserves the right to reject the offer circular if the analysis and basis of opinion does not meet regulatory requirements.
“The IFA should exercise due care, skill and professional judgement in adopting appropriate valuation methodology or methodologies to be used in its analysis and this must be supported by reasonable grounds and assumptions that can withstand scrutiny,” says SGX RegCo.
In its earnings commentary on Feb 27, GEAR acknowledged the higher revenue and earnings. However, the company cited several reasons for a less-than-rosy outlook.
For example, the company warns that coal demand "may soften" as supply bottlenecks are "expected to ease" given the uncertain global outlook and China's economy reopening.
GEAR also points out the coal industry is expected to continue to see elevated pressure on costs, driven by rising input prices on diesel, explosives, tyres, parts as well as labour and general services.
"In particular, the energy coal sector, is facing increasing environmental, social and governance pressures. As large financial institutions phase out energy coal financing and pledge to ‘go green’, coal miners will continue to face financing squeeze with limited alternative options," the company adds.
GEAR shares closed at 86 cents, up 1.18% for the day, and up 160.61% over the past year.
