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Regency becomes new cornerstone investor in Oracle Coalfields

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Oracle Coalfields (PLUS:ORCP) will receive just over £1 million after acquiring a new cornerstone investor who is taking a 10.04 per cent stake in the company.

Regency Mines (LON:RGM), led by Andrew Bell, is buying 18.5 million shares for 5.5 pence each, a premium to the current market price of 5.125p.

Oracle, which is developing a 1.4 billion tonne JORC measured lignite coal project in Pakistan's Sindh Province, also unveiled plans to list on AIM in the first half of 2011.

Chief executive Shahrukh Khan said: "We're  delighted that Regency Mines has recognised the growth potential of Oracle Coalfields and decided to make an early investment in the company. 

“Regency expects to add to its shareholding following the subscription, which is encouraging and we welcome their long term support.  

“We  have recently announced the extension of our exploration licence and are proceeding towards the bankable feasibility study as planned."

Regency’s Bell has a keen eye for a good investment and his company already has interests in Western Australia, Queensland and Papua New Guinea.

In a statement to the stock exchange Regency said: “We see the opportunity to become a strategic investor in Oracle, with close cooperation in a potentially fast growing coal business with good management. 

“Regency expects Oracle if it succeeds in its objective of admission to trading on AIM to achieve greater investor recognition and support, and considers the price at which the investment is being made to be advantageous. 

“The investment is consistent with Regency's philosophy of seeking strategic long term involvements in projects where the scale of planned operations and the price of entry create the opportunity of large and compounding long term returns.”

Oracle is developing Block VI of the Thar Coalfield, which is located 380 kilometres east of Karachi in Sindh Province.  

It plans to excavate lignite coal, which is brown in colour and has lower calorific value than the thermal coal that goes for export from places such as Indonesia. 

Output  from Thar will be used for power generation and specifically for new plants being developed by local utility KESC. 

The two have a memorandum of understanding, which it is hoped will metamorphose into a supply agreement once both sides have concluded feasibility studies. 

While coal production is expected to begin in 2012, it could be another three years before KESC has a power plant up and running. 

Oracle has found a neat way use the time until then. 

It plans to supply coal to Lucky Cement, the nation’s biggest producer of the material, and also hopes to sign up some of its smaller rivals.  Output is expected to be initially up to 1 million tonnes per year to supply the cement works with additional 2.5-3 million tonnes a year production to supply KESC at the time of power plant commissioning. 

The next year to 18 months will be the most crucial in the company’s short history as it takes the project through to a bankable feasibility study. 

 

 

Quick facts: Regency Mines PLC

Price: 3.08 GBX

LSE:RGM
Market: LSE
Market Cap: £2.75 m
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