September 28, 2022 - ASX-listed Australian Pacific Coal has struck a deal with two of its suitors and its creditor and shareholder Trepang Services, which could see the Dartbrook mine being recommissioned as a coal-producing asset.

Australian Pacific on Tuesday told shareholders that following its proposed alliance with M Resources, ongoing discussions with Trepang, and the receipt of a conditional non-binding indicative proposal from Tetra Resources and Javelin Private Capital, the company has agreed to terms and entered into a binding term sheet with Trepang, M Resources and Tetra.

Under the strategic partnership, M Resources and Tetra would each earn a 20% direct joint venture (JV) interest in the Dartrbook mine, while Trepang would earn a 10% free-carried direct interest in the JV if it agrees to extend the existing access and compensation agreement with Australian Pacific, as well as agreeing to various easement arrangements and the transfer of water rights on mutually agreeable terms, that would allow underground mining to continue for the duration of mine life extension approvals.

The transactions suggested under the strategic partnership will be subject to Australian Pacific obtaining shareholder approvals, and will see the company retain a 50% interest in the JV.

If M Resources and Tetra are unable to restart production at Dartbrook within a 27-month period, each of the companies would relinquish their interest in the JV back to Australian Pacific.

Meanwhile, M Resources and Tetra will enter into a mine management services agreement at Dartbrook, which will see M Resources enter into an exclusive marketing services agreement to act as marketing agent for the coal, and an exclusive logistics services agreement for all of the coal produced at Dartbrook. Tetra in turn will be appointed as the operator of Dartbrook.

The strategic partnership is conditional on Australian Pacific successfully completing its ongoing fully underwritten entitlement offer, and the company obtaining all required authorisations, including shareholder approval, for the strategic partnership, within 120 days.

Australian Pacific last month launched a 5.83-for-1 fully underwritten renounceable pro-rata entitlement offer, priced at 34c a share, to raise A$100-million, the proceeds of which would be used to fully repay the Trepang debt and to fund general working capital.

The entitlement offer will close on October 3.

The transaction is also subject to M Resources completing its sub-underwriting arrangements under the entitlement offer, and that no court order or other restraining order or injunction be in effect at the time of the completion of either the entitlement offer or the strategic partnership.

The strategic partnership would result in M Resources being entitled to appoint a director to the Australian Pacific board, and the company is also negotiating with Trepang which could have the right to nominate up to two directors to the Australian Pacific board, for as long as the shareholder maintains a relevant interest of 20%, reducing to one director if the interest falls below 20% to more than 5%.

Dartbrook was placed on care and maintenance in late 2006, on the back of the falling coal price and operational difficulties.