The Australian Pacific Coal Ltd (ASX: AQC) share price is sinking 15.32% lower in afternoon trade on Monday.
Shares in the mining and exploration company were soaring 10% higher earlier in the day, though started to tread lower from midday.
The S&P/ASX 200 Materials Index (ASX: XMJ) has also had a positive start to the week, up 0.6%.
Australian Pacific Coal's shares are faltering amid an update on its non-binding indicative proposal with Tetra Resources and Javelin Private Capital, originally announced on 14 September.
If it goes as planned, the proposal will see Tetra Resources and Australian Pacific Coal have a 40% and 60% split of the Dartbrook coal project. The agreement also involves a debt moratorium agreement with Australian Pacific Coal and its major shareholder, Trepang Services Pty Ltd, and a marketing agreement between Javelin and the joint venture participants.
Let's cover the highlights of what was announced today.
Trepang Services greenlights Dartbrook joint venture proposal
Australian Pacific Coal announced that Trepang Services has approved the proposal for its Dartbrook joint venture, which was one of the prerequisites for moving forward.
It was also announced that Trepang is ready to place a moratorium on Trepang's associates' (Trepang Parties') outstanding debts and that the debt funding will continue for Australian Pacific Coal.
One caveat for the debt moratorium is that the joint venture moves ahead as planned. Trepang will reportedly withdraw its moratorium offer and further debt funding if the agreement falls apart.
Australian Pacific Coal described the offer as "restrictive" and is currently weighing its options. The company notes that it believes progression with the Pacific Premium Coal proposal would be better for shareholders.
Australian Pacific Coal received an offer from Pacific Premium Coal on 7 September. The proposal would see approximately $100 million raised through a 5.83 for 1 pro-rata entitlement offer, with shares offered at 34 cents apiece.
What did management say?
The offer received from the Trepang Parties is therefore restrictive since it does not, amongst other things, provide the Company with the opportunity to consider all of the other proposals before it (including the Pacific Premium Coal proposal) which may be, if they were able to be progressed, in the best interests of shareholders.
The Company is currently considering its position with respect to the advice provided by the Trepang Parties. The Company also still awaits a formal response from the Trepang Parties regarding the Pacific Premium Coal proposal.
Australia Pacific also said:
The Board does have a general concern that the Tetra/Javelin Proposal would see the Company or its Dartbrook project being burdened with additional debt, without its existing debt being paid off first. The Company has engaged a third-party financial adviser who is assisting the Board in their independent assessment of proposals that have been received.
Another bid for its Dartbrook coal project was received on August 24, which was put forth by Naveko Pty Ltd. The offer included an equity subscription of 19.97% of Australian Pacific Coal's shares for a total of $3.78 million and a takeover bid for 30 cents per share.
Australian Pacific Coal share price snapshot
The Australian Pacific Coal share price is up 250% year to date. Meanwhile, the S&P/ASX 200 Index (ASX: XJO) is down 9.6% over the same period.
The company's market capitalisation is $31.3 million.
