Corsa Coal shares to recommence trading after big takeover news

Corsa Coal (TSXV: CSO) said April 10 that its common shares will recommence trading on the TSX Venture Exchange at the open on April 11, 2013.

The halt was a normal course halt required by the TSXV in connection with Corsa’s agreement to acquire Quintana Kopper Glo Investments LLC, announced on March 21.

In addition, the company announced that it is again increasing its published sales guidance. For fiscal 2013 it is increasing its contracted sales guidance to 300,000 to 320,000 tons and for fiscal Q1 2014 to approximately 45,000 to 60,000 tons.

Don Charter, Corsa President and CEO, stated: “We have had very positive sales momentum since the beginning of the fiscal year. This is the result of the hard work of our team and is reflective of the quality of our product.”

The company, which produces coal in and around Somerset County, Pa., continues to actively market its high quality low-vol metallurgical coal and matches production to actual sales.

Corsa said March 21 that it has entered into a binding agreement with Quintana Kopper Glo Investments LLC which, when the transactions contemplated are fully completed, will result in Corsa having raised a total of US$40m and acquiring Kopper Glo, a Tennessee-based coal producer, from Quintana and Quintana having acquired a control position in Corsa.

Quintana Kopper Glo Investments LLC, a portfolio company of Quintana Energy Partners LP and its affiliated investment funds and Corsa have signed a binding agreement dated March 21 under which:

  • Corsa has completed a US$10m private placement cash financing by issuing a C$10.2m convertible note to Quintana convertible into Corsa common shares at C$0.17 a share for a total of approximately 60.2 million common shares, the proceeds of which will be used for working capital;
  • Quintana has agreed to purchase common shares of Corsa at a price of C$0.17 per share (or an aggregate of approximately 176.5 million shares) for aggregate proceeds of US$30m, the proceeds of which will be primarily used to repay the US$25m Sprott Facility; and
  • Corsa has agreed to acquire all of the outstanding membership interests in Quintana Kopper Glo Investment LLC, which operates coal mines near Clairfield, Tenn.

This would all be in exchange for approximately 130.2 million common shares of Corsa and approximately 222.7 million redeemable membership units of its U.S. operating subsidiary redeemable for common shares of Corsa.

Charter said: “We are delighted with the investment by Quintana and their belief in our assets and operating team. This is a major step forward for Corsa in its objective of establishing itself as a significant new US based supplier of metallurgical coal into the world market. With the new capital provided, reduction in debt, immediate cash flow and quality coal together with the involvement and support of Quintana with its experience and expertise in coal, Corsa is well positioned to continue with its sales and production growth and the development of its mining projects.”

George Dethlefsen, Managing Director at Quintana, stated: “We have a very positive outlook on the low volatile metallurgical coal space and Corsa’s high quality coal reserves and mine development strategy fit well within that thesis. Corsa and Kopper Glo together form a well-capitalized platform with exceptional management and operational teams. We believe that this transaction positions Corsa to execute on its long term growth plan to be a large producer of some of the highest quality coal in the world.”

Kopper Glo a producer of steam coal in Tennessee

Kopper Glo’s existing operations produce a low-cost, high-Btu thermal coal product and are positioned to gain regional market share as higher-cost Appalachian production is scaled back, and has sales contracts in place for 2013 and 2014 production, the companies said.

Corsa’s existing operations produce a high quality, low-vol metallurgical coal that is used by domestic and international steel manufacturers as a component in their coking coal blends with contracted sales for 2013 already at 266,000 tons in an improving met coal environment with significant production growth ahead with its Casselman mine in Maryland and the Acosta Deep and Keyser projects in Pennsylvania.

Upon completion of the transaction, Quintana will have five nominees of a board of eight. Corsa will retain the Corsa name and remain headquartered in Toronto, Ontario. Charter’s employment agreement provides that his employment terminates automatically on a change of control and requires that he continue to serve for a three-month transition period.

The transaction will be subject to, among other things, the approval of the TSX Venture Exchange and the approval by Corsa shareholders via written shareholder consent or at a special meeting called to approve the transaction. If Corsa is unable obtain written shareholder consent within the time period contemplated by the investment agreement, it is expected that a special meeting of Corsa’s shareholders to approve the transaction will be held in July 2013. The transaction is targeted to close that same month.

Kopper Glo is a private company formed in 2007 engaged in production and sale of high-Btu, low- and mid-sulfur thermal coal used in power, industrial and specialty applications. Kopper Glo is a non-union company currently producing from two contour surface mines and one deep mine. Its mines, prep plant and refuse site are all located in close proximity providing for efficient operations. It had sales of 975,000 tons of coal in 2012 with an average cash cost of production (unaudited) of US$56 per ton with EBITDA (unaudited) of US$16.5m and net income of US$6.8m (audited).

Kopper Glo has increased its production consistently from about 500,000 tons in 2008 to its current levels and expects to grow sales to over 1 million tons in 2013. It has a good pipeline of projects for expansion. It has access to both the CSX Transportation and Norfolk Southern railroads with its own loadout and 350-ton-per-hour prep plant. It has a current priced contract in place with a major utility for 750,000 tons a year for 2013 and 2014 production at pricing between US$70 and US$80 a ton.

Kopper Glo is majority owned by Quintana Energy Partners LP and its affiliated investment funds. Keith Dyke, President of Kopper Glo, heads up a strong management and operational team with significant surface and underground mining experience and expertise.

Quintana Energy Partners LP and its affiliated investment funds were formed by Quintana Capital Group LP, a Cayman Islands exempted limited partnership, to make control-oriented equity investments across the oil and natural gas, coal and power industries. Corbin Robertson Jr., a member of the fund’s investment committee and a resident of Texas, together with his three adult children, control the General Partner of Quintana Energy Partners LP, which directs the fund’s investment activities. In addition, they own over 23 billion tons of coal reserves in the United States, making them the largest private coal owner in the United States. Robertson is also the CEO and Chairman of Natural Resource Partners LP, a publicly traded coal royalty company.

About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.