Coal producer Scottish Resources Group gears up for London IPO

Britain’s largest surface mining coal producer, Scottish Resources Group, is planning to list on the main market of the London Stock Exchange in July.  Scottish Resources Group will join a plethora of small, mid-cap and large coal producers listed in London, but will be part of a small crowd of mining companies with any meaningful mining operations in the UK.

The company currently operates nine surface coal mines in Scotland, which cumulatively produced around 3.4 million tonnes of coal in the 12 months to March 2010, up 12% on the previous year.  This places the company as the largest surface miner in the country, with around 34% of the surface mining output, and represents around 20% of the UK’s total coal production in 2009.  Not surprisingly, a significant amount of the coal is currently used in power generation.

The company will also give investors exposure to a large land bank (25,000 acres) in the central belt of Scotland that could be used for renewable energy, commercial or residential property developments.  Independent valuers DTZ placed a freehold valuation on the company’s properties at £55.7 million as of April, 2010, though this number could significantly increase with planning approval for commercial or residential developments.

The Scottish based coal producer is looking to raise £25 million from the IPO, which will be used primarily to tidy up its balance sheet and refinance the acquisition of a surface mine site, and to speed up the acquisition of third party rights to of the company’s current properties.  Panmure Gordon is handing the placing.

For the year ended March 2010, Scottish Resource Group generated revenues of £229.9 million, up 59% on the previous year, while EBITDA rose 191% to £48.2 million.

"As the UK's largest surface coal mining company, Scottish Resources Group has the scale, asset base and stakeholder relationships to maximise growth opportunities. We have a strong management team with significant operational experience and a track record of achieving planning consents. Our strategic land portfolio offers residential, commercial and renewable energy opportunities in addition to surface mining, which positions us well for the future,” Don Nicolson, Chief Executive of Scottish Resources Group, said.