PERTH (miningweekly.com) – Bauxite miner Cape Alumina and ASX-listed MetroCoal on Wednesday announced a merger to create a diversified bulk commodities company.

The two companies have signed a merger implementation agreement that would see MetroCoal offer 1.12 of its own shares for every one Cape Alumina share, allowing Cape Alumina shareholders a 55% interest in the merged entity.

MetroCoal would further provide Cape Alumina with a A$3-million convertible note to supplement working capital to accelerate work on the Pisolite Hills bauxite project, in Queensland.

MetroCoal chairperson Stephen Everett said the merger would deliver significant benefits for both companies, including increased near-term development opportunities, a strengthened balance sheet, increased trading liquidity and enhanced access to capital markets.

“The proposed merger will create a Queensland-based, diversified bulk commodities company with a portfolio of major bauxite and thermal coal projects, which will provide resilience through commodity cycles.”

Everett said that the immediate priority of the merged company would be to develop Cape Alumina’s bauxite assets on western Cape York, in particular the flagship Pisolite Hills mine and port project, to capitalise on the strong and growing global market for bauxite and to generate a positive cash flow for the company.

“The merger provides an immediate cash injection from MetroCoal to Cape Alumina, through a A$3-million convertible note, which will allow Cape Alumina to progress the technical and environmental studies required for the Pisolite Hills project to gain the necessary government approvals.”

Everett said that the new entity would also continue to advance the Bundi and Columboola coal projects, in the Surat basin, in line with the longer-term development opportunity for these assets.

The merged entity would have a market capitalisation of A$28-million, with some 464.2-million shares on issue and a cash reserve of A$12-million. The company would have Joint Ore Reserves Committee-compliant resources of 2024-million tonnes of bauxite and 4.2-billion tonnes of thermal coal.

Cape Alumina chairperson George Lloyd said the merger would deliver increased value and returns for shareholders from both companies.

“The directors of Cape Alumina unanimously recommend that shareholders vote in favour of the merger in the absence of a superior proposal and subject to an independent expert’s opinion that the merger is in the best interest of Cape Alumina’s shareholders,” Lloyd said.