Sprott Resources Corp. (
TSX: T.SCP,
Stock Forum) said Tuesday it has agreed to invest US$33.4 million for a 19.9% stake in
Corsa Coal Corp. (
TSX: V.CSO,
Stock Forum), a producer of metallurgical coal with operations in Pennsylvania and Tennessee.
The deal is subject to the completion of Corsa’s US$60 million acquisition of metallurgical coal producer PBS Coals Ltd., which has operations in Pennsylvania, including three active mines.
Corsa Coal shares were unchanged at 13.5 cents, leaving a market cap of $98.1 million, based on 726.9 million shares outstanding. The 52-week range is 19.5 cents and 10 cents.
Sprott Resources previously invested in PBS Coals in 2007 before it was acquired by OAO Severstal in 2008, the company said.
“This transaction has the potential to create tremendous value for our shareholders while providing the added benefit of diversifying SRC’s investment portfolio,’’ said Sprott Resources President and CEO Steve Yuzpe.
Other key Corsa investors include Quintana Capital Group, an established energy investor with more than US$950 million committed to the sector; and the Lundin Group, an internationally recognized group of public companies with investments in the mining and energy sectors.
Metallurgical coal’s main industrial use is the production of steel.
“Metallurgical coal is currently in a bear market with the benchmark price having decreased by more than 50% over the past three years,’’ said Sprott Managing Director Arthur Einav.
“We expect that, on a combined basis, Corsa and PBS will pursue a program of operational improvements and initiatives to realize cost synergies, while also positioning the combined entity to be a growing producer for domestic and export metallurgical coal markets.’’
Sprott Resources Corp. is a resource-focused private equity investor. The shares were unchanged Tuesday at $3.07, leaving a market cap of $301.4 million, based on 98.2 million shares outstanding. The 52-week range is $3.80 and $2.23.