After entering trading halt this morning, Macarthur said its institutional placement would raise approximately $190 million from the issue of 31.8 million ordinary shares at $6 per share.
Macarthur said the placement would allow it to double production in five years.
To do this, funds will go to developing its 70%-owned Middlemount open cut project in Queensland’s Bowen Basin, which has coal reserves totalling 56.9 million tonnes.
Macarthur will also use the cash to continue the pre-development of its 85%-owned Codrilla and Wilunga projects to the north, and other ongoing exploration.
Additionally, under a non-underwritten share purchase plan, Macarthur will offer its existing Australian and New Zealand registered shareholders up to $15,000 worth of shares at the price of $6 per share.
The capital raising comes even as Macarthur expects to make a net profit after tax of between $155-170 million for the current financial year.
The leading pulverised coal injection coal producer is anticipating total coal sales volumes of 4.5-4.8Mt for the same period, up from its previous guidance of 3.9Mt.
“The significant increase in sales tonnage is due to better than forecast spot thermal and short-term LV PCI coal sales during the second half of the financial year,” the company said.
Macarthur is also aiming to improve its hedge book position after a loss of $US97.96 million in net profit from its hedged foreign-exchange contracts last year.
“These increased sales will help the company to reduce the outstanding hedge book more quickly than anticipated earlier in the year,” Macarthur said.
“It is expected that the March 2009 quarter hedges that were rolled forward will be cleared by the end of July.”
Macarthur also flagged a change to its dividend policy, saying it may not pay 50% of its full-year NPAT as a dividend as it has done in the past.
The company blamed "uncertainties about the timing of recovery in global steel markets and therefore metallurgical coal demand" for its potential decision to suspend the dividend, as well as its timeline for its new growth projects.
A final decision on the dividend will be made following the finalisation of the annual accounts, due out on the Australian Securities Exchange on August 26.
Meanwhile, in a presentation made at the UBS Annual Resources Conference yesterday, Macarthur said Chinese coal demand was growing.
“While the data is inconsistent, the anecdotal evidence is very strong as sales of metallurgical coal to China have increased significantly over the calendar year,” the company said.
Macarthur has shipped a number of cargoes of low-volatile PCI and thermal coal to China for the first time in the company’s history.
Australian metallurgical coal exports to China in May reached 4.1Mt and Macarthur said Chinese domestic metallurgical coal had fallen because of tougher safety regulations.
Additionally, Macarthur said world steel production across most regions was starting to show signs of recovery with even non-Chinese production improving.
“A significant amount of spare capacity exists around the world so it will be some time before capacity utilisation rates recover to previous levels.”
Shares in Macarthur remain halted at $6.62.
