Companies: ATH   

AIM-quoted coal play ATH Resources intends to raise a net £16.8 million at 170p to buy two open-cast coal sites with proven and probable reserves of 4.1 million tonnes from The Scottish Coal Company, part of Mining Scotland, in a deal that could have positive implications for key Mining Scotland shareholder, Palmaris Capital. Robert Tyerman reports.

Broker Seymour Pierce is underwriting the ATH issue, at a 5p discount to today’s 175p market price, which will be offered to existing shareholders on the basis of one new share for every three held. The deal will bring ATH, backed by John Moulton’s Alchemy Partners, two sites in Ayrshire, Grievehill and Glenmuckloch. This should more than double its resources and help offset an expected production dip late next year from its existing coal projects in Scotland and France.

ATH chief executive Tom Allchurch hopes to bring Grievehill into production in October and keep it going for two years before restoring it to ‘low-grade agricultural and wildlife uses’. He envisages Glenmuckloch starting to produce in July 2006 at an annual rate of 615,000 tonnes for around four and a half years.

The directors of ATH, which made a maiden £504,000 pre-tax in the ten months to September but lost £14,000 after tax and dividends, intend to take up part of their entitlement to the issue. Alchemy, however, is going to sit it out and see its holding fall to 18 per cent.

With the company’s French mines expected to start production soon, Allchurch says ‘this acquisition increases the group’s reserve base by more than 160 per cent and provides longer-term stability while we develop our own new mines.’ Advisers say ATH is still looking for more assets or companies to buy.

At 175p, up 31 per cent since Growth Company Investor’s August recommendation, the shares still have longer-term appeal. Fellow AIM counter Palmaris Capital, with 21 per cent of Mining Scotland, could win more friends too.