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Prairie Mining soars as reports suggest major deal is imminent (PDZ)

Prairie Mining (LSE:PDZ) soared by nearly a fifth to 32p following reports that its Polish coal assets could soon be snapped up by coal major Jastrzębska Spółka Węglowa (JSW).

Over the weekend, Polish media reported that JSW’s president had told a press conference that Prairie’s Dębieńsko and Jan Karski mines have met its coal quality expectations following a technical audit. Reports suggest that the business will decide on whether to proceed with transaction talks by the middle of next month, with legal inspections and valuation calculations now underway. Prairie and JSW announced that they had entered into a non-disclosure agreement concerning potential co-operation around Prairie’s Polish coal projects back in March.

Prairie attempted to downplay the speculation this morning, noting the reports before confirming that discussions continue to take place as part of the exchange of technical and commercial information. It said: ‘Commercial discussions continue to be at a preliminary stage and that even if they move onto discussions of specific transactions terms there can be no certainty as to whether any transaction(s) will be agreed or the potential form of such transaction(s). The Company expects further exchange of information will continue with JSW.’

Prairie added that any transaction will be subject to conditions like obtaining positive evaluations and expert opinions, necessary corporate approvals, consents and approvals related to funding.  It said it may also have to get consent from Poland’s competition authority and meet any other requirements that may relate to the strategy, objectives and regulatory regimes applicable to the respective issuers. Regardless, investors pounced on the potential offered by the talks, and shares in the business had risen by 18.5pc as at the time of writing.

Jan Karski is a large scale semi-soft coking coal project located in the Lublin Coal Basin in south-east Poland. It is situated adjacent to the Bogdanka coal mine, which has been in commercial production since 1982 and is the lowest cost hard coal producer in Europe. According to Prairie, Jan Karski has the potential to produce a high-value ultra-low ash semi-soft coking coal with a coking coal product split of up to 75pc.

Debiensko Mine is a hard-coking coal project located in the Upper Silesian Coal Basin in the south west of the Republic of Poland.

Prairie shot up in April after a civil court has ruled in its favour in legal proceedings against Poland’s Ministry of Environment to protect security of tenure over Jan Karski. In July 2015, Prairie secured the exclusive right to apply for a mining concession at the site, subject to receiving approval for development plans and securing an environmental consent decision by 2 April 2018. Due to a delay in the issue of an environmental consent decision, Prairie was not able to meet this deadline.

However, the right granted Prairie the legal ability to apply for a ‘mining usufruct agreement’ for an additional 12-month period of exclusivity beyond April 2018. The firm applied for this agreement in December last year and, under Polish law, the Ministry of Environment (MoE) is obligated to grant the extension within three months of application. As the MoE failed to give this extension, Prairie began legal proceedings against the government body to protect its security of tenure over Jan Karski earlier this year.

After a difficult period, the firm bounced back in late April after reporting that the Polish Civil Court had ruled that the MoE cannot grant licences to or make agreements with any other party until court proceedings have finished. According to Prairie, this decision provides security of tenure over the Jan Karski concessions and safeguards its rights at the project.

Author: Daniel Flynn

Disclosure: The author of this piece does not own shares in the company mentioned

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