Introduction

Palaris engaged to provide independent review for the purchase of a significant holding in operating open cut coal mines along with future underground development, combining due diligence with asset optimisation JORC reporting and valuation to support the Client.

Mandate

The scope consisted of a two-phase approach to investment review by the Client.  

An initial red flags assessment was undertaken to provide the Client with sufficient confidence in reliance on the vendors technical, cost and contract information presented to make an informed decision to proceed to full due diligence and optimisation 

The due diligence and optimisation phase was then primarily focused on the operating mining assets, assessing their future operation and cash flow potential. This included providing a view on maximising the value of the assets. 

Approach

Both phases of work were supported by Palaris’ mining and financial services teams drawing on their considerable benchmark data and mine optimisation knowledge from similar projects in the region. The team was supplemented by specialist logistics and environmental consultants to provide a seamless whole of asset review. 

Value maximisation initiatives included identifying the highest cash margin areas of the mine to prioritise extraction (via margin ranking), optimising productivity and utilisation of the mining fleet, margin ranking to enhance the mining schedule, rationalisation of investment capital and optimisation of progressive rehabilitation and final closure practices.  

Ground-up cost modelling to free on rail along with provision of independent JORC Resource and Reserve statements and physicals scheduling were completed. These fed into discounted cash flow and resource/reserve multiple valuation models. All valuation was completed under the VALMIN Code. 

Following due diligence the Palaris team worked closely with the Client on technical and financial aspects of the transaction including assistance to secure financing from a consortium of hedge funds for the acquisition. 

Outcome

Palaris’ independent reports assisted the Client successfully entering into a up to USD 1.35 billion purchase agreement for 80% share of the assets.