Prairie Mining (LSE:PDZ) declined 7.1pc to 19.5p on Tuesday morning after announcing a six-month extension to discussions around a potential deal on its Polish coal projects. Prairie and major coal miner Jastrzębska Spółka Węglowa (JSW) have signed an agreement to extend the terms of a non-disclosure agreement (NDA) related to a potential co-operation arrangement until 28 September 2019.
The possible link-up was first announced last March and saw Prairie give JSW access to information on its hard coking coal project under the Debiensko-1 concession and its Jan Karski project in the Lublin Coal Basin. JSW has since been conducting an assessment of the feasibility and economics offered by both projects.
This has now completed and has confirmed that Jan Karski’s Lublin deposit contains semi-soft coking coal that it can potentially utilise. JSW’s work has also shown the technical feasibility and potential synergies of accessing initial seams at the Dębieńsko deposit. This would employ existing infrastructure at JSW's adjacent Knurów-Szczygłowice mine and potentially enable the production of hard coking coal within 18 months of permits being granted.
In Tuesday’s update, Prairie said the NDA has been extended for the ‘purposes of continuing discussions’. It added that the firms would discuss a potential deal structure and commercial terms for any co-operation or transaction. They will also look at developing the existing mine plans for both projects to fit in with JSW’s plans.
Jan Karski is a large scale semi-soft coking coal project located in the Lublin Coal Basin in south-east Poland. It is situated adjacent to the Bogdanka coal mine, which has been in commercial production since 1982 and is the lowest cost hard coal producer in Europe. According to Prairie, Jan Karski has the potential to produce a high-value ultra-low ash semi-soft coking coal with a coking coal product split of up to 75pc. Meanwhile, the Debiensko nine is a hard-coking coal project located in the Upper Silesian Coal Basin in the south west of Poland.
Prairie shot up to more than 30p last August after Polish media reported that JSW’s president had told a press conference that Dębieńsko and Jan Karski mines had met its coal quality expectations. Prairie attempted to downplay the speculation, stating:
‘Commercial discussions continue to be at a preliminary stage and that even if they move onto discussions of specific transactions terms there can be no certainty as to whether any transaction(s) will be agreed or the potential form of such transaction(s). The Company expects further exchange of information will continue with JSW.’
The firm added that any transaction will be subject to conditions like obtaining positive evaluations and expert opinions, necessary corporate approvals, consents and approvals related to funding. It also said it may also have to get consent from Poland’s competition authority and meet any other requirements that may relate to the strategy, objectives and regulatory regimes applicable to the respective issuers. These terms were once again referred to in Tuesday’s update.
Author: Daniel Flynn
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