Yancoal Australia’s
(ASX:YAL) Chinese state-owned parent has quietly dropped its under-priced takeover offer for the minorities in the local coal miner.
Yankuang Energy had offered $3.60 a share in convertible bonds for the remaining 498.2 million shares not held in Yancoal.
In a statement late last Friday, the parent said it would now terminate all potential transactions, “in light of recent market conditions”.
The news saw the shares retreat from a near record high of $7.14 on Monday to eventually close down 1% on the day at $6.84.
Yancoal shares were trading above $5 at the time the odd offer was made in late May and the surge in global thermal coal prices from then on took the price to well above $6 and completely out of range for the parent’s el cheapo bid.
The parent says it is still open to negotiations with its Australian offshoot which is 62.26% owned by Yankuang.
Global miner and big Australian thermal coal exporter, Glencore bailed out of Yancoal Australia during the offer, selling its small stake for $442 million. Glencore had earlier rejected the parent company’s offer as being ‘too low’.
Yancoal’s surging earnings explain why the under-priced offer went nowhere.
EBITDA jumped more than 670% to $3.153 billion in the six months to June 30 on a much smaller 169% rise in revenue to $4.776 billion. That was a performance Yancoal Australia had never experienced before.
The average price of $314 a tonne for the half year was 234% higher than the first half of the previous year.
After tax earnings of $1.738 billion were up from just $129 million in the first half of 2021.
The interim dividend was 52.71 cents a share.
Cash flow topped $2.8 billion and the company had $3.4 billion in cash in the bank at June 30 some of which was used after balance date to get rid of $232 million in debt.
The company also made a big debt repayment before June 30.
This record result came on a sharp fall in production to 25 million tonnes for the half year from 29 million because of the wet weather and flooding earlier this year.
Yancoal is forecasting thermal coal prices to remain over the next year. International thermal coal prices are still at near record levels above $US400 a tonne on the Newcastle coal index (for coal similar to that produced and sold by Yancoal).
Looking at 2022 as a whole, Yancoal is forecasting saleable coal production of 31 to 33 million tonnes. Cash operating costs are expected to be $84 to $89 a tonne. Capital expenditure is predicted to be between $550 and $600 million.
And a record full year result is forecast – the bid from the Chinese parent never had a chance against that background. So why was it made in the first place?
