The Securities and Exchange Commission (SEC) has approved a plan by coal producer Sultan Mining and Energy Development Corp. to raise P480 million in fresh capital from an initial public offering (IPO).
Sultan is offering domestic investors 480 million new common shares at a par value of P1.00 each. The shares will be equivalent to 33.5 percent of the company's outstanding capital after the maiden offer.
The company has tapped Asian Alliance Investment Corp. as lead underwriter for the IPO.
According to Sultan vice-chairman Rufino Bomasang, the mining firm was pushing through with the public offer because "global investors continue to be bullish about prospects of coal stocks despite challenging market conditions."
He said coal prices may double this year due to threatened supply in China, Indonesia and Australia.
He added that the Philippines continues to import huge amounts of coal to fuel its power plants amid inadequate local supply.
To meet growing demand and take advantage of surging prices, Sultan is ramping up coal production in its Surigao del Sur mine to at least 300,000 metric tons this year from less than 20,000 MTs in 2007.
Located in the town of Bislig, Sultan's coal mine is now in full commercial production after the company invested P100 million to bring in more heavy equipment so it can simultaneously develop and operate several open pits to extract surface coal.
Sultan senior vice-president for operations Ricardo Basallo Jr. said "production volume will steadily increase once additional open pits come on stream with the help of expansion efforts financed by fresh funds Sultan will raise from its planned P480-million IPO."
The company plans to use the offer proceeds to partially finance its capital expenditures related to additional exploration of its coal operating contract areas, and improvements and expansion of coal extraction and processing facilities. It will also use the funds to pay existing debts.
For April alone, Sultan reported a 120-percent increase in production volume to 22,000 MTs, exceeding figures for the entire first quarter of the year. In May, it said output expanded further to 25,000 MTs.
"Sultan's management believes that the company is in a position to increase and sustain profitability for the remaining eight months of 2008 as it continues to increase monthly coal production and convert these into sales," said Anthony Buyawe, Sultan chief finance officer.