Maxim Power Corp. Completes Sale of Coal Subsidiaries
CALGARY, Alberta — Maxim Power Corp. (TSX: MXG) is thrilled to announce the successful closure of its sale involving 100% ownership of its subsidiaries, Summit Coal Limited Partnership and Summit Coal Inc., collectively recognized as Summit, to Valory Resources Inc. for a sum of $14.2 million. This deal includes $10.2 million in cash and an additional $4 million in equity securities, represented by a 15% interest-bearing convertible note.
Details of the Convertible Note
The Convertible Note is set to mature in 2027 and offers the option for Maxim to convert it into Valory’s common shares upon specific events such as sales or equity raises. This conversion will occur at a 30% discount relative to the share valuation at the time of conversion. Notably, as part of the sale, Summit comes with $2.2 million in restricted cash, leading to net cash proceeds for Maxim totaling $8 million. Valory holds the option to redeem this note at any point.
Royalty Agreement and Ground Lease Insights
As part of the agreement, Maxim, through Summit, is entitled to receive a 3% royalty on raw coal volumes produced from coal leases managed by Summit, including its Mine 14 project. These royalty payments will hinge upon production commencement, with no set timeline on when production may initiate.
Additionally, Maxim has also partnered with Valory through its subsidiary, Milner Power Inc., to establish a ground lease at the Milner site. This initiative aims to facilitate the construction of a coal processing facility. The ground lease spans twelve years but may automatically terminate if the facility isn’t significantly completed within two years. The lease payments consist of a fixed annual payment of $2.1 million with additional variable payments based on coal processing throughput.
Projecting Future Developments
While the potential for variable payment from coal processing exists, there is currently uncertainty regarding when construction will start or when coal may be processed. Despite this, Maxim has begun receiving fixed payments — the first yearly installment of approximately $1.4 million was received on the same day as the sale.
All About Maxim Power Corp.
Incorporated in Calgary, Alberta, Maxim Power Corp. is recognized as one of Canada’s predominant independent power producers, focusing entirely on power projects within Alberta. The company operates a 300 MW H.R. Milner Plant, a state-of-the-art facility that began operations in late 2023. Maxim is continuously assessing development options, including gas-fired and wind power generation projects, which are currently in the permitting stages.
Contacting Maxim Power Corp.
For more information, stakeholders can reach out to Maxim's leadership.
Bob Emmott, President and CEO, (403) 263-3021
Kyle Mitton, CFO and Vice President, Corporate Development, (403) 263-3021
Frequently Asked Questions
What was the amount involved in Maxim Power's recent sale?
Maxim Power completed the sale of its coal subsidiaries for $14.2 million, which includes cash and equity securities.
What is the Convertible Note?
The Convertible Note allows Maxim to convert funds into Valory common shares at a 30% discount under certain conditions.
How will the royalty agreement work?
Maxim will receive a 3% royalty on coal produced from leases managed by Summit once production commences.
What is the duration of the new ground lease?
The ground lease for the proposed coal processing facility is set for twelve years but may terminate if construction isn’t completed within two years.
What are Maxim Power's future project plans?
Maxim is exploring further development options in Alberta, focusing on gas-fired and wind power generation projects.
