Straits Resources (SRL) is pleased to announce financial close of its strategic alliance with the PTT Group of Companies via the sale of a 60% interest in SRL’s wholly owned subsidiary, Straits Bulk & Industrial (SBI), for up to US$335 million as announced to the market on 23 March 2009.
The strategic alliance between SRL and PTT will deliver the following benefits:
- Achieves SRL s vision to establish a global coal vehicle with the financial capability to actively pursue opportunities in the thermal coal sector;
- Introduces a motivated and financially capable major shareholder to support Straits Asia Resources Limited s future growth and development;
- Realizes significant value for a portion of SRL s coal assets whilst providing SRL with continuing economic interest and management influence;
- Re weights SRL s portfolio across bulk commodities, precious metals, base metals and other investments, diversifying SRL s exposure to commodity price, country and approval risks;
- Strengthens SRL s financial position to pursue strategic acquisitions in the resources sector at a low point in the cycle;
- Provides the opportunity for a return of capital to SRL shareholders; and
- Facilitates a potential re-rating of the SRL share price as a result of unlocking the value disconnect between SRL s market capitalization and the implied value of the 47.1% stake in SAR.
SRL has received the upfront cash completion payment of US$220 million from PTT. The remaining performance payment of up to US$115 million relates to certain matters in connection with reserve upgrades in relation to the mine located on Sebuku Island, South Kalimantan, Indonesia controlled and operated by SAR or as otherwise agreed between PTT and SRL. The performance payment is expected to be realized during 2009. Following receipt of the US$220 million cash proceeds, SRL has repaid the A$45 million Debt Facility provided by ANZ and Macquarie Bank Limited in full. The Board of SRL is currently reviewing the funding requirements of SRL going forward. As previously foreshadowed, SRL expects to return approximately one fifth of the total consideration received by SRL from the transaction to shareholders.