Montem Resources (ASX:MR1) Managing Director & CEO, Peter Doyle discusses the company's metallurgical coal projects in Canada, exploration upside and IPO.
Jessica Amir: Hello I’m Jessica Amir for the Finance News Network. Joining me from Montem Resources (ASX:MR1) is CEO and Managing Director Peter Doyle. Hello Peter and welcome.
Peter Doyle: Thanks very much for having me.
Jessica Amir: First up, just give us a quick introduction to the company?
Peter Doyle: Sure. Montem Resources is a metallurgical coal development company with assets in Canada. Our assets are based next to existing mines. We have four projects that have had mines before that have exported their coal to Japan. And we’re restarting the Tent Mountain mine with production forecast to start within two years.
Jessica Amir: For those who aren’t familiar, just tell us about the importance of metallurgical coal?
Peter Doyle: Metallurgical coal is an essential ingredient in the development and production of steel, from the blast furnace. Approximately 75 per cent of global steel production is from blast furnace. Of that it takes about 800 kilograms of metallurgical coal to make one tonne of steel. So these buildings around us, the cars that we drive, the houses that we build, the ferries that we travel in, all contain steel. Global production is around about 1.7 billion tonnes of new steel every year.
Jessica Amir: What can you tell us about the metallurgical coal prices?
Peter Doyle: Metallurgical coal price, hard coaking coal price, currently US$185 and long-term average price US$180 approximately, over the last 10 years. Concentration of supply in Canada, Australia and from the US, and new suppliers looking at strong forecast pricing with a spot market, looking very resilient over the next three years.
Jessica Amir: I understand you have four key projects. Just tell us about the Chinook Properties?
Peter Doyle: Chinook Properties are located in southern Alberta, adjacent to existing export mines. The four main projects are called Tent Mountain and Chinook South and Chinook North, and Vicary-Racehorse. Tent Mountain and Vicary-Racehorse previously exported all their coal to Japan, to be used in making steel. The Tent Mountain mine was closed in 1983. It retains a mine permit, it retains an environmental approval that needs amendment, before we can start mining. The IPO is to fund development work on the project to bring it up to a ready to construct status, and to get that amended application from the Government. That will take us the next 18 months to two years to complete, and we believe we’ll bring first coal to the market in 2020.
The other Chinook properties are all brownfield development properties. We have exploration results from historical work that shows 163 million tonnes of JORC declared resources, across these deposits. Low stripping ratio coal, adjacent to infrastructure, the railway’s within 10 kilometres of these, straight to the port for export to Asia. And we’re going to put a lot of the IPO funds into bringing these projects up to prefeasibility level, over the next 18 to 24 months.
Jessica Amir: Now let’s talk about that in a little more detail, the IPO. How much are you looking to raise?
Peter Doyle: We are seeking to raise a minimum of $15 million and a maximum of $20 million, through the issue of new equities, priced at 50 cents. That’ll give a market capitalisation of approximately $55 million for the company. And we’ll use the funds to do the development work over the next two years that I previously spoke of.
We’ve had very strong institutional interest in the offer, a leading funds group here in Australia, Regal Funds Management hold significant position in our stock. And we’ve also had other institutions here in Australia and in Hong Kong and Singapore have a good, strong interest in the stock. We expect to close the offer on the 14 September 2018.
Jessica Amir: Thanks, Peter. So how can people get involved?
Peter Doyle: We've lodged our prospectus with ASIC. The offer is open. You can access the prospectus via our website, or you can talk to your broker.
Jessica Amir: Lastly Peter, just tell us why you think investors should be backing your IPO.
Peter Doyle: We have multiple advanced projects in a mining-friendly jurisdiction, with high quality met coal. We have an expert team of Australian and Canadian mining experts to do the work, and we have a clear pathway to production.
Jessica Amir: Thanks so much for your time Peter Doyle and good luck with the listing.
Peter Doyle: Thank you.