Melbourne. Indonesian firm Cakra Mineral has offered at least A$70 million ($54 million) to take over Australian miner Cokal, which is developing a coal project in Central Kalimantan.

Cakra, backed by one of Indonesia’s biggest conglomerates, the Sinar Mas Group, is looking for metallurgical coal for a planned pig iron smelter and nickel pig iron smelter, Cakra corporate secretary Dexter Sjarif Putra said on Tuesday.

Cokal said in a stock exchange release it had received an incomplete proposal from Cakra, which operates iron ore and zircon sand mines, and would engage with Cakra to evaluate the offer.

Under the deal, Cakra would offer A$70 million in cash, or A$0.15 a share, which would be a 58 percent premium to Cokal’s last close.

Alternatively, it would offer A$87.5 million in Cakra shares, worth about A$0.19 per Cokal share at current prices.

Cakra, which has a market value of $60 million, would need to nearly double its share base to go ahead with the acquisition, which would need approval from Indonesia’s Financial Services Authority (OJK) ahead of a shareholder vote.

“We hope that with this smelter we are developing we can produce pig iron so we will no longer be exporting raw materials,” Putra said.

While the premium being offered looks large the proposal is well below the A$124 million that Cokal was offered in October 2013 from Singapore firm Blumont Group.

That deal was scrapped after Blumont’s shares plummeted.

The offer comes as Cokal has been struggling to line up funding for its promising $75 million Bumi Barito Mineral metallurgical coal project in Indonesia, with coal prices trading just above six-year lows.

“The important thing for us is that in the current climate an Indonesian group can see good value in what we’ve been doing up there,” Cokal executive chairman Peter Lynch said.
“Whether this is the right deal for us or not, we have to work our way through that.”

Cokal’s shares jumped 26 percent to a four-month high of A$0.12, staying below the offer price amid uncertainty over whether a deal would go ahead.

Cokal has lined up $110 million in project financing from Platinum Partners and Cedrus to build the Bumi Barito mine, aiming to start production in the second half of 2016.

Lynch said it had also been in talks with other strategic players and private equity investors on potential cheaper sources of funding, but declined to give details.

Reuters

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