Paringa Resources secures funding for US coal mine expansion

Paringa Resources ASX PNL coal production Poplar Grove mine
Paringa Resources plans to use some of the new debt facility to fund the expansion of a third mining unit at its Poplar Grove coal mine in Kentucky, US.

US-based coal miner Paringa Resources (ASX: PNL) has secured a US$56 million term loan facility to repay debt and accelerate a planned expansion of its Poplar Grove coal mine in Kentucky.

The facility, to be provided by Tribeca Global Resources Credit Pty Ltd, will refinance the company’s existing US$21.7 million debt with Macquarie Bank, fast track the expansion of a third mining unit at the project, as well as provide additional working capital.

Paringa commenced initial mining operations at Poplar Grove in December and is working on ramping up to a coal production capacity of 2.8 million tonnes per annum.

In an announcement today, the company said it hopes to have the funds available for drawdown by the end of April.

According to the company, Tribeca’s offer is an “attractive” funding package that provides low overall cost, low shareholder dilution and flexibility in relation to early repayment.

“The debt financing proposal from Tribeca is a great endorsement of the Poplar Grove coal mine and significant milestone for Paringa in accelerating production to 2.8Mtpa,” Paringa managing director Egan Antill said.

Debt financing terms have been approved by Tribeca’s investment committee with the funding subject to the completion of remaining due diligence, finalised documentation and satisfaction of conditions precedent.

Paringa said Macquarie is supportive of the refinancing.

Poplar Grove mine

Paringa commenced initial operations at the underground Poplar Grove mine, located in western Kentucky’s Illinois coal basin, in December 2018.

At the start of this month, the company reported mining productivity increasing with raw coal production ramping up to targeted levels.

Poplar Grove’s coal handling and preparation plant is currently processing raw material (comprised of raw coal and waste rock) from the mine and the build of initial product stockpiles has commenced.

Based on long-term contract prices and a steady state of production of 2.8Mtpa, the mine is forecast to generate earnings before interest, tax, depreciation and amortisation (EBITDA) of around A$40 million in the 2021 calendar year.

In 2023, EBITDA is expected to rise to around A$50 million, Paringa claimed.

The company has a 4.75Mt sales contract with LG&E, one of the biggest fuel buyers within the Ohio River market. It is targeting delivery of its first processed coal to this customer in the second half of March.

It also recently inked a coal sales agreement with Big Rivers Electric Corporation, which operates two major local coal-fired power stations in Kentucky. Under the terms of the deal, Paringa will sell up to 1.4Mt of coal from 2019 to 2023.

In addition, the company has a deal with the Ohio Valley Electric Corp and Indiana-Kentucky Electric Corp joint venture to sell 650,000t of coal from 2019 to 2020.

Paringa shares were up more than 23% at $0.16 by early afternoon trade.

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