Oracle in funding talks

16/04/2010 Robert Tyerman

Pakistan brown coal play Oracle Coalfields is talking to local banks about backing its £129 million Thar project in Sindh Province.

Oracle is currently a PLUS-quoted minnow valued at some £3.4 million, but Shahrukh Khan, the company’s well-connected chairman, insists developing Block V1 of the Thar coalfield, holding an estimated 1.4 billion tonnes of lignite, could transform its prospects and take it to AIM late this year with a float funding in the region of £40 million. He says a £600,000 bankable feasibility study on producing four million tonnes a year from Block V1’s already proven resource of 371 million tonnes is expected in the third or fourth quarter of 2010 and suggests this could underpin a 70-30 debt/equity funding deal for the project.

That would trigger Oracle’s long-hinted AIM move and funding, against a background of strong demand in power-hungry Pakistan. Khan contends the Islamabad Government has ousted Al-Qaeda from its strongholds and repaired relations with the USA, while infrastructure projects are now winning support from local and international agencies.

Oracle has signed one memorandum of understanding about supplying fuel to major Pakistani cement maker Lucky Cement, controlled by the powerful Younis brothers, and another with Karachi Electric Supply Company, backed by the Middle East Abraj group, paving the way for a potential power plant at Block V1. Khan says local coal prices are now picking up strongly to $100-a-tonne or more after halving between 2008 and earlier this year to 80 a tonne and argues Oracle would be comfortable at prices even below $100.

Oracle shares trade on PLUS-quoted at 2.875p, with a hefty 0.75p spread, against a 12-month high of 5.5p. They have speculative appeal for the brave.