Bounty Mining set to list on ASX alongside growing Chinese demand for coking coal

Efficiency is the name of the game in coal mining and Bounty Mining (ASX: B2Y) plans to reshuffle some prized coal assets previously held by Caledon Coal and Glencore.

The newest entrant to the ASX has raised $18 million for its IPO and is expected to later today.

Bounty raised the funds by offering 51 million shares at $0.35 per share. Upon listing, the coal miner is expected to be worth around $120 million by market capitalisation and will move into production as early as next year.

Bounty is a coking coal mining miner that owns the Cook Colliery and coal handling plant, Cook CHPP, in the Bowen basin in Queensland. The miner also owns additional development assets in Queensland, including the Cook North Project and the Minyango Project in the Bowen basin, and the Wongai project in the Laura basin.

Bounty Mining will use the funds raised as part of its IPO to acquire Cook Colliery from previous owners Caledon Coal and Blackwater Coal for $31.5 million, and associated assets from Glencore for another $10 million.

The acquisition is said to comprise of a package including $6.7 million paid in cash and $33.3 million deferred over 12-months, according to terms sent to potential investors. Importantly, Bounty’s listing includes all mining equipment and infrastructure, including rail.

Once listed Bounty Mining is expected to resume mining at Cook Colliery in 2019 and has already informed potential investors it plans to increase coal production to 1.8 million tonnes (Mt) in the first 12-months.

Longer term Bounty says it can raise production to around 2.2Mt with a full complement of existing infrastructure including underground mine with fans, rising conveyors, access drift, electricity supply, workshop, warehouse, run of mine stockpile infrastructure, which in tandem mean Cook Colliery can accommodate a higher mining rate.

According to its prospectus, Bounty intends to expand operations at its Cook Colliery to four underground mining areas, with the intention of producing approximately 2.2Mt per annum on a run of mine basis.

Independent geological and technical reviews confirm mineral resources estimates of 460Mt at the Cook Colliery and Cook North project, 190Mt at the Minyango project and 90 Mt at the Wongai project.

Once production is in full swing, Bounty will supply its Cook Colliery product to the primary export markets of China and Japan, currently growing on the back of a renewed industrialisation cycle in Asia that is boosting coal imports from Australia.

Market analysts estimate China will import around 9 billion tonnes of coal in 2019 which accounts for 60% of global demand growth, as the world’s second-largest economy shifts towards an economy driven more by domestic consumption rather than the development of housing, roads and cities.

Prior to its listing this week, Bounty said it has negotiated rail and port access arrangements, as well as a coal sale agreement with XCoal Energy & Resources GmbH.