Ord River Resources (ASX: ORD) can purchase between 5% and 10% of Caledon Resources (ASX: CCD, LON: CDN) at the takeover price paid by Chinese state owned investment firm Guangdong Rising Assets Management Co (GRAM), providing Ord River with an entry into the lucrative coal market.
Today Ord River has explained to the market further details about how the option may be exercised by the company.
Ord River stated:
'ORD has no obligation or responsibility to contribute capital to Caledon or carry out any work for Caledon post acquisition.
'We want to highlight that as agreed in the option agreement, ORD can choose to exercise its option anytime post completion of the acquisition.
'ORD will not exercise this option at the time of completion.
'ORD will not raise capital in the foreseeable future to fund the exercise of the option.'
The very positive outcome for Ord River is that the option effectively gives the company direct exposure to future growth in an attractive energy resource without any downside, or short term need for new capital.
Ord River said it will only exercise the option if the value within the option far exceeds the cost.
The GRAM offer values Caledon at around A$400 million, or £251.6 million, a 34% premium to its closing price of £0.8375 on Friday 5 November and a 53% premium to its volume weighted average price of £0.7316 for the 20 trading day period leading up to the offer.
Caledon’s flagship project is the formerly mothballed Cook mine in Queensland purchased in 2006.
In 2009, Caledon mined 604,000 tonnes of coal from Cook, up from 548,000 tonnes in 2008.
The latest figures show the group’s raw coal production from operation rose 35% to 174 million tonnes of raw coal in the three months to the end of June.
Caledon has targeted saleable output of 700,000 tonnes this year.
The group is currently carrying out a feasibility study on the neighbouring Minyango prospect, which it also bought back in 2006, which has a JORC compliant resource of 342 million tonnes.
GRAM has investments in a range of listed and unlisted entities across a wide range of sectors, including non-ferrous metals, technology, hotels and construction.
GRAM has recently been active in the mining sector having acquired a 19.9% interest in PanAust Limited, an ASX listed copper and gold mine operator for A$215 million in 2009.
Article highlight:
The Ord River Option effectively gives the company direct exposure to future growth in an attractive energy resource, without any downside or short term need for new capital.