Investors welcomed today's news with the Perth-based company's share price soaring as much as $1.17 (19%) in morning trade to hit an intraday high of $7.38 with over 1.6 million shares changing hands by 11am EST.
Under the restructure, the Perth-based company's coal assets will now be held by Singapore-listed subsidiary Straits Asia Resources, while the remaining metal assets will remain with Straits.
Straits, which holds a 51% stake in Straits Asia, is planning to distribute its shares in Straits Asia to its own shareholders on a proportionate basis.
As part of the transaction it is expected that Straits Asia will seek to dual list with a secondary listing on the Australian Securities Exchange.
Straits chief executive Milan Jerkovic said the demerger was simply a reorganisation of how the coal assets were held by shareholders and that their shareholdings in Straits would not change under the demerger.
"Right now most of our value is coming from this coal business which we only have 51 percent of," he told MiningNews.net.
"The other metal assets are just not getting the market attention because at this stage it is not as large as the coal [assets].
"But it is essentially business as usual for Straits Resources, without the coal business that's all."
Jerkovic said the new corporate structure would provide future growth opportunities for both Straits Resources and Straits Asia.
"We are planning to on an arm-length basis value the current coal assets that Straits Resources holds and they will be purchased into this new global coal entity, and the idea is that we will reposition our coal business to go from just being Indonesian-focused to now having access to two new bases in Brunei and in Madagascar, and broaden that horizon into a more global coal player," he said.
"The reason for that is our business in Indonesia is quite substantial. It is about 10 million tonnes of production this year going up to 12-14Mt next year. We want to use that base to consolidate and grow rather than just be focused in the one region."
In terms of its non-coal assets, Jerkovic said it was reviewing its entire portfolio.
"Straits will be a diversified mining company which is going to have essentially two operating mines in New South Wales," he said.
"The real earnings from those assets will come through next year and they are quite substantial. It's going to have plenty of peers in the base metals and the copper space to value it against in the Australian market.
"[Straits Resources] is not small," he added. "You are talking about a company that is heading towards something like 60,000 tonnes of copper production a year, substantial amount of gold coming from Hillgrove, potential for development here in WA and quite a sizeable exploration portfolio in South Australia and New South Wales."
Jerkovic added that the new entities would be looking at acquisitions both on the metal and the coal fronts.
"The coal front will be more aggressive because it is a fairly opportune time for consolidation in that space and if we are going to go global we clearly have to move beyond the assets we have and look at new opportunities," he said.
Depending on various board, shareholder and regulatory approvals, Jerkovic expects the demerger process will take around three to four months to complete.
Straits' operations include the Tritton copper project in New South Wales, the Whim Creek copper operation in Western Australia, as well as the Mount Muro gold mine and Sebuku coal mine in Indonesia.
The news comes during a time of soaring coking coal prices, with BHP Billiton last week confirming it had secured price rises of between 206% and 240% for its BMA Queensland coking coal in negotiations with overseas customers.
Shares in Straits have since cooled to $7.02 in late morning trade.
