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BL Research Bureau

The Australia-listed subsidiary of Gujarat NRE Coke — Gujarat NRE Minerals will make an off-market takeover offer to acquire another Australian coal producer Rey Resources, in which it is already a stakeholder. Rey Resourses has a production capacity of 500 million tonnes of thermal coal resources and coal gas methane.

Gujarat NRE Coke has a domestic production capacity of one million tonne for met coke, while it has a 500 million tonne capacity in Australia. The acquisition of Rey Resources will double the capacity of Gujarat NRE Minerals. Rey Resources’ primary business is thermal coal production and owns high grade coal, oil and gas resources in North

Gujarat NRE Minerals currently holds 16.6 per cent stake in Rey Resources. According to Gujarat NRE Minerals, the cost of acquisition for one share in Rey Resources works out roughly to A$0.09 (total cost will be A$428899 or Rs 161.78 lakh). The company has not disclosed anything about the funding mechanism for this acquisition. Shareholders of Rey Resources will get one share in Gujarat NRE Minerals for every five shares held by them.

One key benefit from this acquisition could be doubling of production capacity. Apart from holding vast high grade coal, oil and gas resources in Western Australia, Rey Resources has several mineral exploration projects located in Chile and Peru. These mines hold prospects for copper and gold. If Gujarat NRE opts to explore these resources further, it would be able to diversify its business operations.

Despite being in the list of top coking coal producers in Australia, the year ended March 2009 was quite dismal for the buyer. Loss before income tax for FY 09 was A$15.73 million compared to A$7.47 million last year. Rey Resources ended FY 08 with an after tax loss from operations of A$3.20 million.

While Rey’s financial numbers for FY-09 is not available, cash balance as of March 31, 2009 was A$1.49 million. The acquisition could act as a drag on Gujarat NRE Coke’s consolidated profits in the near-term as Rey suffered losses as of March 2008.

More Stories on : Stocks | Overseas Investments | Coke & Metalurgical Coke

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