In the wake of the $US2.65 billion purchase of a stake in the NSW coal assets of Rio Tinto last year, the China-controlled Yancoal Australia has hinted that it is looking at measures to improve the liquidity of its shares.
News of the moves came as the company revealed yesterday it had prepaid another $US450 million in debt to two major Chinese banks, taking the amount repaid since late last year to $US600 million.
That move was announced at the company’s annual meeting in Sydney where the few shareholders who attended heard Yancoal’s chairman Xiyong Li explain that the company’s stronger operating performance financial position and cash flow scale “allows us to make debt and loan arrangements more conducive to Company developments in the future."
He also told the meeting that Yancoal is “also considering several options to help improve the liquidity of our stock, in the interests of existing shareholders and to support future investment.”
Nothing else was said, but a share consolidation would not surprise.
Yancoal has nearly 43.96 billion shares on issue, but only 5.1% of that, or around 2..25 billion is available to the public to trade on the ASX. A consolidation could see that reduced to a less costly (for listing fees) level and lift the shares price from around the 13.5 cents currently. A one for ten split could see the price boosted to around $1.30 to $1.40.
Yancoal paid $US2.69 billion for 100% of Coal & Allied Industries Limited from Rio Tinto last September. In early May the sale of 49% of that stake to Glencore (which owns coal mines nearby in the NSW Upper Hunter Valley) was completed.
Thanks to increased production output and high prices prices for semi-soft coking and thermal coals Yancoal’s reported a profit after tax of $A229 million from revenue of $A2.6 billion for the full year ended to December 31 last.
Yancoal conducted a pro-rata renounceable entitlement offer (“Entitlement Offer”) of 23,464,929,520 fully paid ordinary shares to raise US$2.35 billion, and an associated placement of 1,500,000,000 fully paid ordinary shares (“the Placement”) to raise a further US$150 million, to support the funding of the Coal & Allied acquisition.
Hence the surge in the number of shares on issue and the need to reduce that wall of paper via something like a consolidation.
Glencore completed the acquisition of 49% interest in Yancoal’s Hunter Valley Operations. China’s Yancoal holds a 51% stake in the joint venture.
After Yancoal’s acquisition of Coal & Allied from Rio Tinto — Glencore bought a 16.6% interest in the HVO from Yancoal for approximately $US429 million and a 32.4% interest directly from Mitsubishi Development, Rio Tinto’s partner in the Hunter Valley operations.
In 2017, Yancoal produced 23.4 million tonnes of saleable (equity basis) thermal and (soft) metallurgical or coking coal, producing Earnings Before Interest and Tax of $A732 million up $693 million from 2016’s performance.
Thanks to the purchase of the Coal & Allied assets, Yancoal Australia achieved profitability for the first time since its listing, and its coal production, sales, operating income, and total assets all hit record highs.
"Our 2018 guidance for saleable production is now 35 – 37 million tonnes (equity share) and the forecast for 2018 capital expenditure is approximately $A247 million (equity share), the annual meeting was told yesterday.