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Oracle Coalfields shares surge on Chinese deal; boss says pieces fitting into place

Shares in Oracle Coalfields were up 50% earlier this morning after the group secured a second Chinese partner that will help it develop the power potential of its Thar lignite deposit in Pakistan. Chief executive Shahrukh Khan told Proactive Investors: “All the pieces of the jigsaw are fitting together very well.”
Oracle Coalfields shares surge on Chinese deal; boss says pieces fitting into place

Shares in Oracle Coalfields (LON:ORCP) were up 50% earlier this morning after the group secured a second Chinese partner that will help it develop the power potential of its Thar lignite deposit in Pakistan.

Chief executive Shahrukh Khan told Proactive Investors: “All the pieces of the jigsaw are fitting together very well.”

The AIM-listed mining group has signed a memorandum of understanding (MOU) with SEPCO Electric Power Construction Corporation, which will build a 600 mega-watt electricity plant in Sindh Province.

Oracle already has a joint development agreement with Chinese state-owned CAMCE, which will focus on developing the coal mine on Block VI in Pakistan’s Sindh Province.

Speaking from China, Khan explained: “We now have two key partners who are willing to finance the project on the debt and equity to take the project forward to fruition: mining development as well as power development.

“You get with that technical know-how, because these two have the skill set to develop a mine and a power plant, with many years of industry experience in China and overseas, and you have full support, effectively, from the China government because these are both state owned enterprises.”

It will take at least three years from commissioning to build the new plant, which means it won’t be operational before 2017.

That said, the power station will be double the size that was initially envisaged, which means that output from the mine will rise to 5mln tonnes a year from the 2.4mln that were in the original plan.

Khan said: “This means the economies of scale kick in, which is very good for our project and financial modelling, cash generation and returns.”

After raising £805,000 from investors in October, the group has enough funds for its near-term. However, it will look to raise cash to consolidate its majority position in the mining operation. It expects to be a minority investor in the power business.

The Oracle boss said: “Understandably, if we want to have a serious shareholding in the company then there will be a fund-raise, but it will be a limited fund-raise because a good amount of the equity is coming from the Chinese.

“It is all about making sure that our new and existing shareholders are comforted over the next few months.”

As well as the two Chinese partners, the group has a power off-taker in the form of Karachi Electric Supply Company, which has agreed to take all the electricity generated. Meanwhile, some of Pakistan’s largest cement manufacturers have signed MOUs to take any excess coal produced by the Thar mine.

At 11.30am, the shares were up 39% at 2.76p, valuing Oracle at £9mln. Earlier it was trading at 3p for a more than 50.5% rise.

Khan said: “The markets on the whole should be confident that the building blocks, the basic foundation of the company, are now in place.”


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