Australian company, Straits Resources' shares soared after it said it had agreed to sell its South-East Asian coal assets to its joint venture partner Thai energy major PTT International Co.
The company, under plans for demerger of its coal business intends to sell 100 per cent of its shares to PTT Mining Ltd for $1.72 per share. In addition to the cash payment, shareholders would also receive one share for each share of Straits held by them, in a new company formed to hold Straits' metal assets.
Trading in the shares of Straits had been halted last at $1.94, but resumed in mid afternoon and ending the day up 27 cents, or 14 per cent, at $2.21. In February 2008, the company's shares were traded at $7.05.
According to Straits Resources, if the planned demerger is implemented, the new entity, MetalsCo – would come to hold all the metals and associated businesses that are currently held by SRL.
"MetalsCo will be a pure metals company focused on copper and gold with a portfolio of producing assets and exploration assets," Straits said in a statement.
According to Straits chairman Alan Good demerging of the group's coal and base metal assets marked an important step in unlocking value for shareholders.
"For some time now, the see-through value of our shareholding in Singapore-listed Straits Asia Resources, plus cash and investments, have exceeded our market capitalisation," Good told the company's annual general meeting today.
"The metal assets have effectively been trading at negative value.
"The de-merger we believe, will reverse that situation by underpinning a more appropriate and transparent value for both the coal and metals businesses."
According to Good, the new company would be sharply focused on copper, with Tritton copper mine near Nyngan in NSW targeting 25,000 tonnes in the current financial year.
"If, as anticipated, China and India continue to grow at current levels, the outlook for commodity markets in the medium to long term remains extremely positive, with prices for most products expected to remain above long-term averages," he said.
"Your company is positioned in three of the best commodities; coal, copper and gold."
Good added that Straits had "performed below expectations" in the last financial year, with both Tritton and the Mt Muro in Indonesia under recapitalisation to improve production rates.
"The re-capitalisation programmes at Tritton and Mt Muro will be completed towards the end of the 2011 financial year and lay the foundations for sustained growth," he said.
Good said, in 2011, the new metals company would focus on exploration of the Goldminco portfolio in NSW and targets in South Australia.
"We believe these exploration assets are world class and have the potential for significant growth and value addition in the years ahead."
Meanwhile, Thailand's largest energy conglomerate, PTT, would acquire Straits Resources for $544 million, the group said today in a strategy for expansion into coal assets offering good prospects for growth.
The purchase of the diversified resources company would be made through PTT International,. a wholly-owned company of the PTT group through its wholly-owned unit PTT Mining.
The announcement came in a filing with the Stock Exchange of Thailand.