3rd UPDATE: Aston Resources IPO Share Price Slashed - Source

The price of coal group Aston Resources Ltd.'s initial public offering was slashed 27% Friday to attract more investors, a person familiar with the matter said, as investment bankers continue to grapple with how to price floats in the still volatile Australian market.

Aston secured the A$400 million of subscriptions needed for its initial public offering through a book build at A$5.96 a share, down from the A$8.20 price the shares were being marketed at earlier this week, the person said.

The company, controlled by founder Nathan Tinkler, had originally sought to raise around A$400 million from an IPO and list itself on the Australian Securities Exchange with a market value of about A$1.5 billion, despite paying about a third of that amount for its key asset less than a year ago.

Tinkler agreed last November to buy the Maules Creek coal prospect from Rio Tinto Ltd. (RTP) for US$480 million at a time when the diversified mining giant was continuing its divestment strategy to shore up its balance sheet. Commodity prices at the time, however, had recovered somewhat from the doldrums of late 2008 and early 2009.

The coal property, containing metallurgical and thermal coal, is in the Gunnedah Basin in northern New South Wales state. It is yet to be developed and access to rail and port facilities still need to be finalized.

Tinkler intended to keep a near 40% interest in the newly listed entity, and Asian commodities traders Noble Group Ltd. (N21.SG) and Itochu Corp. (ITOCY) have agreed to become cornerstone investors in Aston.

Presumably, the float was timed to capitalize on strong demand for Australian coal assets, which have attracted takeover offers together worth more than US$6 billion so far this year.

The Aston bookbuild, however, came at the same time that another Australian coal company, Gloucester Coal Ltd. (GCL.AU), was conducting a share issue, which potentially soaked up liquidity. The Gloucester secondary offer came at a 26% discount.

Aston is also talking to a potential third-party investor, the person said Thursday.

Its listing is the first major IPO to test the Australian market since a few disappointing floats late last year left the primary market all but shut.

Most recently, Bilfinger Berger AG (GBF.XE) was marketing its Australian construction business to raise up to A$1.39 billion but that deal, which was being viewed as a bellwether for the nation's IPO market, was pulled last month because the group couldn't achieve sufficient demand at its asking price.

The last large IPO, for department store Myer Group Holdings (MYR.AU), is currently trading 15% below its offer price, compared to a 0.2% rise in the broader market since Myer listed in November.

It's been a different story in Australia's coal sector, where company share prices have skyrocketed on takeover activity, including Thai miner Banpu PCL's (BANPU.TH) bid for Centennial Coal Co. (CEY.AU) and India's Adani Enterprises bid for a coal property owned by Linc Energy Ltd. (LNC.AU).

The deal activity has been fueled by a gradual recovery in commodity prices, continued projections of high long-term demand for commodities from Asia, and new Australia's Prime Minister Julia Gillard's decision to water down a proposed tax on miners.

-By Ross Kelly, Dow Jones Newswires; 61-2-8272-4692; [e-mail]

(Cynthia Koons in Sydney contributed to this article)