Australian biotechnology company Avexa Limited will acquire a 25.5% stake in US-based Coal Holdings for A$3.88m ($4m).
The acquisition will enable Avexa to partly own the North Pratt Coal Seam, located 15km north of Birmingham in Alabama, US.
Avexa will also lend Coal Holdings up to $6m at an interest rate of 6% per annum. The loan will be used to purchase the equipment and machinery necessary to re-open the mine and commence operations.
The remaining 74.5% of Coal Holdings will be owned by Singapore-based entrepreneur Jonathan Lim, American coal veteran Jimmie Ryan and Wild Dog Mining, an Australian private company represented by mining contractor Colin Macdonald.
Ryan and Wild Dog Mining currently own 100% of Coal Holdings and are selling the 25.5% stake to Avexa.
Avexa chairman Iain Kirkwood said, "The deal makes good commercial sense for Avexa. Two experts have reviewed and verified the technical and economic assumptions used in the project’s business plan. Production costs are budgeted at $50/ton."
"The base case metallurgical coal selling price of $130/ton is expected to generate $85 million a year gross. Earnings before interest and tax area expected to be $50 million a year."
Avexa’s share will earn $12.5 million pre-tax each year or $8.1 million after tax for the 15-year life of the mine based on these assumptions.