Coal mining concession tied to Geo Energy’s US$154 million acquisition valued at US$1 billion

AN INDEPENDENT valuation report has given Indonesian coal producer Geo Energy Resources certainty that its recent US$154.1 million acquisition of 58.7 per cent of the issued shares of Indonesia-listed coal miner Golden Eagle Energy is value accretive.

The group on Thursday (Aug 24) said the report, released on Thursday as well, relates to the core asset of Golden Eagle Energy, a coal mining concession under Triaryani. Independent qualified person RungePincockMinarco has given it an estimated mining valuation of around US$1 billion, the group said in a bourse filing.

This comes as the mining concession, located in the South Sumatra province of Indonesia, was determined to have a coal resource of 388 million tonnes, and coal reserves of 275 million tonnes, as at May 31. 

This translates to a total net present value with a preferred value of US$957 million, based on a constant coal price, according to the report. And if a variable coal forecast was used for the calculation of this value, the amount would stand at US$809 million, the report noted.

“With the above independent valuation of (the concession) and significant upside of the integrated infrastructure business, the board is of the view that the acquisition of Golden Eagle Energy is a value accretive acquisition for the group,” Geo Energy said.

The valuation came through a probabilistic modelling of key economic assumptions, and the values were derived based on an income approach, using a discounted cash flow model with a base 12 per cent discount rate, the company noted.

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The mining concession holds a production operations permit that is valid through May 22, 2030, for an area of 2,143 hectares, with two further 10-year extensions possible, it added.

Shares of Geo Energy closed up 2.3 per cent at S$0.22 before the announcement on Thursday.