ATH Resources plc joins AIM
June 11 2004 - 4:00AM
UK Regulatory
RNS Number:6159Z
ATH Resources plc
11 June 2004
Press Release 11 June 2004
ATH Resources plc
("ATH Resources" or "the Company")
First day of dealings on the Alternative Investment Market
ATH Resources plc, one of the UK's largest coal producers, today announces the
commencement of dealings of its Ordinary Shares on the Alternative Investment
Market (AIM) of the London Stock Exchange. Seymour Pierce Limited is acting as
Nominated Adviser and Broker to the Company. The stock market EPIC will be
ATH.L.
Placing Statistics
Total number of Ordinary Shares being placed 16,544,117
Number of Sale Shares being placed on behalf of the Selling Shareholder 7,352,941
Number of New Ordinary Shares being placed on behalf of the Company 9,191,176
Issue Price 136p
Number of Ordinary Shares in issue immediately following Admission 29,770,176
Percentage of the Enlarged Share Capital being placed 55.57%
Market capitalisation at the Issue Price #40.5 million
Reasons for Admission to AIM and use of proceeds of the Placing
The net proceeds of the Placing of the New Ordinary Shares, expected to amount
to #11.25 million will be used by the Company primarily to repay existing debt
within the Group to improve the balance sheet. The Company will repay the
Discounted Loan Notes held by The Alchemy Plan. The amount to be repaid under
these loan notes as at the date of Admission is approximately #6,140,239.
In addition to the Discounted Loan Notes, the Company will repay the Fixed Rate
Loan Notes. The amount to be repaid under these loan notes, including accrued
interest, as at the date of Admission is approximately #1,679,566. The Company
will also repay approximately #1m of bank debt and an amount of #271,000 in
deferred dividend. The remaining proceeds will be used to fund the development
of the Group.
Tom Allchurch, Chief Executive of ATH Resources, said: "We are delighted that
the flotation of the Company has been completed successfully. The listing will
enable us to take ATH Resources to the next stage of its development and
maximise any opportunities for the Group within the UK coal mining industry and
overseas."
For further information:
ATH Resources
Tom Allchurch, Chief Executive Tel: +44 (0) 1302 760 462
tom@ath.co.uk www.ath.co.uk
Seymour Pierce Limited
Sarah Wharry, Corporate Finance Tel: +44 (0) 207 107 8000
sarahwharry@seymourpierce.com www.seymourpierce.com
Media enquiries:
Bankside
Sarah Hollins/Sebastian Lomax Tel: +44 (0) 113 390 6100
sarah.hollins@bankside.com www.bankside.com
Introduction
The Group is an operator of opencast coal mines in the UK with its current two
operational mines, Skares Road and Garleffan, located near New Cumnock, East
Ayrshire in Scotland. The Management Team believes the Group is currently the
third largest producer of coal in the UK.
The Management Team has been in place since 1998. Aardvark TMC was incorporated
as the vehicle through which the Management Team acquired rights to operate (and
subsequently acquired) the Skares Road mine with support from The Alchemy Plan
and Bank of Scotland. Following ATH's incorporation in October 2003, and backed
by a follow on investment from The Alchemy Plan, the Group acquired the
Garleffan mine in November 2003.
There are an estimated 3.28 million tonnes of coal reserves and resources at the
Group's two operational mines, Skares Road and Garleffan, of which 2.72 million
tonnes are in the categories of proven reserves and indicated resources.
The two operational mines are together currently producing at the rate of
approximately 1.6 million tonnes per annum. The Group has pre-sold most of the
coal produced from these two sites to the electricity supply industry (ESI)
through contracts at formulated prices. Production in excess of that sold to
the ESI is sold to the industrial and house coal markets, generally attracting
significantly higher prices.
In addition to the Skares Road and Garleffan mines, the Group also has a number
of other coal mining projects in Scotland and two in France, which are at
different stages of development, but which the Management Team believes could
yield in aggregate over 11.5 million tonnes of coal potentially supporting
production well into the future. Exploratory drilling programmes have been
carried out on some projects and more are planned for 2004-2005.
The opencast coal industry in the UK
The opencast coal industry in the UK commenced in the 1940s. With the
privatisation of British Coal in the mid 1990s, the Industry became open to
competition and a number of operators developed larger mines which prior to
privatisation had largely been the preserve of British Coal. The opencast coal
industry produced approximately 12.1 million tonnes of coal in 2003,
approximately 6.9 million tones of this production was from Scotland and
comprised 24 per cent of total UK coal production.
Opencast coal sites are surface mining operations utilising large hydraulic
excavators and off-road dumptrucks to strip overburden materials (boulder clay
and rock) to expose coal seams for subsequent extraction by teams of smaller
excavators and trucks. Overburden from the initial excavation at a site is
placed in tips outside the excavation area to provide sufficient working space
or void. The working void progresses over time across the site as coal is
extracted and further overburden is excavated and placed in the de-coaled void
in a continuous mining and restoration operation.
Soils from the initial excavation are stripped and stored separately and, as the
mining operation progresses, soils from subsequent excavations are placed
directly to bed on the overburden placed in the de-coaled void, leaving only the
initial extraction of overburden and soils to be restored to the final void on
completion of coal extraction. Operators typically take care of the restored
landform for 5 years after soil replacement to carry out activities such as soil
improvement, fencing, tree and hedge planting and field drainage. Sites are
returned to a number of uses including agriculture, forestry, nature
conservation and other forms of development.
Markets
Coal was used to generate 34.7 per cent of the UK's electricity in 2003. In
addition, coal is utilised in industrial processes such as cement manufacturing
and sugar processing and in the heating of hospitals, schools and public
buildings. Coal is also used in domestic heating systems and on open fires.
The coal supply industry generally functions in two ways. Producers mainly hold
coal supply contracts directly with electricity generators, but often sell
smaller volumes of industrial and household coal through wholesalers who supply
the end users.
The Group holds coal supply contracts with four of the UK's main electricity
generating companies. These contracts are at formulated prices, with some
tonnages supplied fixed and some future tonnage contracted at the customer's
option. The Group has sufficient fixed contract tonnage to meet its anticipated
sales requirements for the next two years.
The Group also supplies into the higher margin industrial and household coal
markets. In the 52 weeks ended 28 September 2003 this yielded approximately 31
per cent of the Group's income from 21 per cent of its production. This product
is marketed to the end user through wholesalers. The coal sold to these markets
requires additional preparation to ensure higher quality. The Management Team
believes that the Group is one of the largest indigenous producers of household
coal and the third largest producer of coal in the UK.
Industry process and regulation
The UK is comprehensively geologically mapped. Coal bearing strata identified
on geological maps allows for relatively straightforward mining prospect
identification. Once a prospect is identified a developer typically negotiates
access rights to the surface and the subjacent strata through the negotiation of
options to buy or lease the area required.
Having completed satisfactory geological research, including the drilling of
boreholes to intersect the coal reserves and enable accurate quantification and
analysis, the developer must obtain the necessary statutory consents to operate
the mine.
In Scotland, the opencast coal mining industry is subject to regulation in
respect of planning control and environmental impact by the local planning
authorities and the Scottish Environment Protection Agency (SEPA). Applications
for planning consents for coal mining are normally accompanied by an
Environmental Statement. This is a comprehensive assessment of the potential
environmental impacts of the proposal and it sets out mitigation measures
designed to minimise environmental impact to an
acceptable level. The planning authorities consult amongst statutory and
non-statutory bodies, as well as local residents and local interest groups, to
ensure that all foreseeable environmental impacts have been addressed and are
considered to be acceptable.
Prior to commencing site operations, a 'Consent to Discharge' is required. This
consent permits the discharge of water from a site into watercourses. The
consent is issued by SEPA and specifies minimum standards for the quality of the
discharge water in order to protect the receptor watercourse. The discharge
water is regularly monitored and water samples are analysed to confirm that the
discharge is of acceptable quality.
Under the provisions of the Environmental Protection Act 1990, sites also
require authorisation to operate a coal processing plant. This is referred to
as a 'Part B Authorisation'. The Part B Authorisation is issued by SEPA and is
designed to ensure that processes which might emit coal dust are subject to
proper control, in order to minimise any impact of dust on the environment.
The Group's operational opencast coal sites
Skares Road
The rights to operate the Skares Road mine were acquired by the Company's
subsidiary Aardvark TMC in May 1998 supported by funding from The Alchemy Plan
and Bank of Scotland Structured Finance. The mine, which commenced production
in December 1998 with a then estimated reserve of 3.0 million tonnes of coal, is
situated approximately 10km north-west of New Cumnock and covers an area of
approximately 495 hectares.
The Management Team has developed the coal reserves of the mine through
identifying additional working areas, negotiating agreements with landowners and
successfully applying for planning permission to extend the operations. As at
28 March 2004 some 3.8 million tonnes of coal had been extracted.
This year the mine is expected to produce approximately 600,000 tonnes of coal
and the Management Team expects the mine to continue production until 2006. As
at 28 March 2004 there was an estimated 980,000 tonne proven reserve remaining
at the mine.
The majority of the coal produced at this mine has been forward sold to the ESI
under contracts at formulated prices, although significant proportions of
production are sold into the household coal market (14 per cent of production
overall) and the industrial and non electricity markets (11 per cent of
production overall).
The coal sold to the ESI is transported to coal burning power stations in
England via a third party's railhead at Killoch and also via the Group's own
railhead at Crowbandsgate near New Cumnock. The coal sold into the household
and industrial non-electricity markets is transported by road.
Transporting the coal sold to the ESI by rail is the most cost effective means
of transportation. In addition to the Group saving costs by using its own
railhead, the Management Team believes it may also generate additional revenue
in the future by using spare capacity to transport coal mined by other operators
in the region.
Garleffan
The Group acquired the Garleffan mine in November 2003. The mine, based
approximately 5km north of New Cumnock, covers an area of approximately 170
hectares and has been in production since 1999. The Management Team believes
that the mine will produce approximately 1 million tonnes of coal next year
which has been forward sold to the ESI.
As at 28 March 2004 there were an estimated 1.5 million tonnes of proven
reserves with approximately 215,000 tonnes of additional indicated resources at
the Garleffan mine. The Management Team has also identified a further extension
to the mine which has inferred resources of 560,000 tonnes and an exploratory
drilling programme is underway to provide more geological detail.
The Management Team intends to negotiate access rights and apply for the
appropriate consents should the results of the drilling exploration programme
confirm the inferred resource. This would extend the operation in a similar
manner to that achieved at Skares Road.
The Group transports its production from the Garleffan mine to coal burning
power stations in England via the Group's Crowbandsgate railhead.
Prospective mining projects
The Group has identified a number of projects for future opencast coal mines to
replace production at the Group's two operational mines.
* The Muir Dean site covers an area of approximately 180 hectares in Fife. The Group currently controls the
majority of the site through a combination of freehold ownership and options to lease or purchase.
There has already been extensive borehole drilling on the Muir Dean site which was carried out by British
Coal and by a private operator. The Group itself has undertaken a significant drilling programme and this,
together with past drilling records, has demonstrated a potentially workable site containing seven coal
seams. Analysis indicates that there is a measured resource at the Muir Dean site of 2.2 million tonnes
of coal and the Management Team believes that the site is likely to receive planning permission in
response to an appropriate application.
* The Laigh Glenmuir project of some 35 hectares is located approximately 2 km to the north of the
operational Garleffan opencast coal mine. Analysis of the results of 146 boreholes demonstrates an
indicated resource of approximately 840,000 tonnes of coal. The site is similar to the nearby Garleffan
opencast mine in that there appear to be no old mine workings beneath the site, resulting in an
advantageous overburden ratio of approximately 11.9 m3 overburden to 1 tonne of recoverable coal. The
Group holds the land under an option.
* The Directors are evaluating a site, Project A, in close proximity to one of its existing mines. The
Group has an option to lease part of this site and is in negotiation to gain access to the remainder of
it.
* The Group has exclusive exploration and negotiating rights over the Rigg Estate and Kyle Farm, which
comprise approximately 2,300 hectares in the vicinity of the Garleffan mine and the Crowbandsgate
railhead. Exploration on both sites is expected to commence in 2004.
* The Group has identified a site in North Lanarkshire where the Management Team has estimated there is an
inferred resource in excess of 500,000 tonnes of coal. The Group would need to acquire a combination of
freehold and leasehold interests and necessary consents to operate this site.
The Group has a French subsidiary, Societe des Ressources Minieres du Massif
Central SA (SRMMC), which together with Aardvark TFC is in the process of
acquiring coal concessions in France which the Group plans to develop into two
opencast coal mines.
* Bertholene, is a series of six existing coal concessions approximately 18km eastwards from the town of
Rodez in south-central France. The French state has approved the transfer of these concessions to SRMMC
and Aardvark TFC. These concessions cover an area of approximately 4,500 hectares and the Group intends
to undertake an exploratory drilling programme once the acquisition is complete. The Group has made a
preliminary assessment that indicates an inferred resource of some 4.5 million tonnes of coal on one of
the concessions and the Management Team believes the remainder of the site has considerable potential.
* An application has been made by SRMMC and Aardvark TFC for a concession (Project B) covering 287 hectares
of land in central France and the Management Team expects this should be granted by the end of 2004.
Underground mining has been undertaken on this site in the past and the surface outcrop zones of the coal
seams were excavated in open cast trenches which are now flooded to form deep lakes. The Group intends to
carry out a large scale opencast coal mining and land reclamation project.
Following the acquisition of the concession and once authorisation procedures have been completed, the
Group intends to carry out further confirmatory drilling before starting on the detailed assessment and
planning of the opencast mine. Preliminary assessments indicate an inferred coal resource of
approximately 3.2 million tonnes.
Non-coal prospects
The Group is currently progressing a project to develop a quarry on the southern
fringes of its Skares Road site. The Management Team estimates from the results
of initial exploration drilling that the site could yield approximately 9
million tonnes of aggregate suitable for construction and railway uses.
The Group controls access to the site, owns approximately 30 per cent of the
surface land and is in discussion with the remaining surface and mineral owners
to acquire options over the remainder.
The Group succeeded in gaining planning permission for the development of 36
houses on a restored opencast coal site in East Ayrshire and is in negotiations
to dispose of this asset.
Financial record and current trading and prospects
Three years ended 30 52 weeks 52 weeks 26 weeks
September ended ended ended
2001 29 September 2002 28 September 2003 28 March
2004
Turnover #51.8 million #17.6 million #19.4 million #16.7 million
Operating profit before
exceptional costs #7.8 million #0.5 million #1.4 million #0.3 million
Exceptional costs #4.2 million - #0.2 million #0.4 million
Profit/(loss) before
interest & taxation #3.6 million #0.5 million #1.2 million #(0.1) million
The exceptional costs during the three years ended 30 September 2001 relate to
payments made to the Aardvark Qualifying Employee Share Ownership Trust, an
Inland Revenue approved employee share ownership plan ("ESOP") which is now
closed.
The exceptional costs during the 52 weeks ended 28 September 2003 and the 26
weeks to 28 March 2004 relate to the costs incurred in the acquisition of the
Garleffan site in November 2003.
The results to 28 March 2004 have been prepared on a pro-forma basis and include
the two months of trading of Aardvark TMC prior to the establishment of the
Group in November 2003.
The Group's trading performance for the 26 weeks to 28 March 2004 was in line
with Directors' expectations and ahead of budget for the period which was
influenced by the planned re-engineering of the recently acquired Garleffan
opencast coal mine in order to improve operational efficiencies, supported by a
strong performance at the Skares Road opencast coal mine.
Trading for the year to date is in line with the Directors' expectations and the
Directors anticipate that this will continue to be the case for the remainder of
this financial period.
Strategy
The Management Team intend that, following Admission, the Group will continue to
grow organically, drawing on the proven track record and experience in
identifying high yielding coal producing sites. This organic growth is expected
to be concentrated in Scotland.
Following Admission the Management Team also intend to pursue suitable
acquisition targets in the UK coal mining industry which would be complementary
to the Group's existing operations and prospects. The Company intends to fund
acquisitions following Admission through a combination of shares, debt and cash.
Dividend policy
The Directors' intention is that the Company will follow a progressive dividend
policy in forthcoming years while continuing to retain a sufficient proportion
of the Group's earnings to facilitate the Board's plans for the continued growth
of the Group both organically and through acquisition. It is intended that the
first dividend to be paid by the Company following Admission will be the final
dividend in respect of the period ended 26 September 2004. The Board will
continue to review its dividend policy as the Group develops.
Directors
The Management Team have between them over 100 years of experience in the coal
mining industry.
David Port, Non-Executive Chairman, aged 57
David Port qualified as a chartered management accountant whilst with National
Freight Company Limited (now Exel plc) where he rose to become Group Chief
Accountant.
Following three years at Northern Foods Plc as Finance Director of the dairy
division he joined British Fuels Limited as Finance Director and rose to Chief
Executive and Chairman leading the management buyout from British Coal during
the privatisation process and disposing profitably of the business in a trade
sale in 1997. From 1997 to 2001 David was Executive Chairman of Sylvan
International Limited, a #200 million turnover timber business with operations
in France. David is currently Chairman of Petrol Express Limited, Non-executive
Director of Global Natural Gas Limited and Non-executive Director of Global
Natural Energy Plc. David has been Non-Executive Chairman of the Group since
its establishment in 1998.
Tom Allchurch, Chief Executive, aged 40
Tom Allchurch is a graduate mining engineer and has spent his entire career in
the development and operation of opencast coal mines. Tom initially trained as
a site engineer with Shand Mining Limited, a contractor to British Coal, before
joining Bayford Mining Limited, a smaller private mining company, in 1986. In
1991 Tom joined Rackwood Colliery Company Limited as projects manager and was
responsible for the development of a number of UK and French projects including
Skares Road. Tom left Rackwood Colliery Company Limited in 1998 leading the
Management Team in acquiring the rights to operate (and subsequently acquire)
the Skares Road mine. Tom was Chairman of the coal industry trade association,
the Confederation of UK Coal Producers, in 2001 and 2002. Tom has been Managing
Director of the Group since 1998.
Richard Croston, Finance Director, aged 38
Richard Croston qualified as a chartered accountant in 1992 with Price
Waterhouse and worked in their audit department. Richard had periods of
secondment to clients including British Gas Energy Centres Limited and Debenhams
plc as a financial accountant and Beverley Building Society as financial
controller. Richard joined the Group in 1998 as Financial Controller and has
been Finance Director of the Group since 2000.
Mike Tod, Development Director, aged 40
Mike Tod is a chartered minerals surveyor and commenced his career gold mining
with Gencor in South Africa and subsequently moved to uranium mining in Namibia
with RTZ. In 1990, Mike returned to the UK to work as a consultant for Wardell
Armstrong, a leading UK mining and minerals consultancy firm.
Mike joined Tom Allchurch's project team at Rackwood Colliery Company Limited in
1995 and was instrumental in the development of and subsequent acquisition by
the Management Team of Skares Road and its management buyout from Rackwood
Colliery Company Limited in 1998. Mike has been the Development Director of the
Group since 1998.
Alistair Black, Operations Director, aged 34
Alistair commenced his training as a site engineer with Coal Contractors Limited
in 1986, progressing to site manager of the Roughcastle North site in 1994. In
1996 Alistair joined Rackwood Colliery Company Limited as regional production
manager responsible for two opencast and one underground mine in Scotland.
Alistair joined the Group in 1998 as operations manager for the Skares Road mine
and became Operations Director in 2000. Alistair gained his MBA from Heriot
Watt University in
1999. He is also the Health and Safety Director for the Group.
John Hodgson, Marketing Director, aged 56
John Hodgson commenced his career with the National Coal Board in 1964 as a
chemist in the scientific department, from where he progressed to assistant
regional marketing and preparation officer in 1975. In 1981 John joined Burnett
& Hallamshire Fuels plc as production director responsible for the production
and marketing of coal from twelve coal washing operations. In 1984 John
transferred to Rushcliffe Fuels Limited and was managing director from 1989 to
1993. John joined British Fuels in 1993 as general manager of the International
and Sourcing Division, responsible for sourcing the entire company's solid fuel
requirements. John joined the Group in 1998 as its Marketing Director.
Vaughan Williams, Non-Executive Director, aged 60
Vaughan Williams has a degree in politics from Exeter University. Vaughan spent
4 years at British Steel from 1968 to 1972 before joining a predecessor company
of BHP Minerals Europe Limited as coal sales manager, later promoted to director
responsible for coal sales in Europe, CIS, Middle East and Africa. Vaughan then
moved to BHP Coal Australia Pty Limited in 1986 as manager of their marketing
operations. After returning from Australia, Vaughan became deputy managing
director at BHP Minerals Europe Limited in 1988 and subsequently managing
director in 1990. Vaughan then became vice president marketing at BHP Billiton
Diamonds Inc in 2000 where he remained until 2003.
Ivana Slade, Non-Executive Director, aged 28
Ivana Slade is the representative of The Alchemy Plan on the Board. Ivana has
been an investment executive at Alchemy Partners since 2001. Previously at Bear
Stearns in London and New York, Ivana worked in the mergers and acquisitions
team. She holds a masters degree in Business Administration and Economics from
the University of St Gallen, Switzerland. The Alchemy Plan is entitled to
appoint a director to the Board for as long as it retains an interest in 10 per
cent or more of the Company's issued share capital.
- Ends -
This information is provided by RNS
The company news service from the London Stock Exchange
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