Forge Resources' Coal Play: A High-Risk, High-Reward Gambit in Colombia

Forge Resources has moved decisively to lock in control of Aion Mining’s La Estrella coal project, a fully permitted asset in Santander, Colombia, with an anti-dilution agreement that secures its 80% stake. The $2.3 million transaction, structured with a mix of Forge shares and promissory notes, underscores a bold strategy to capitalize on rising demand for metallurgical coal—a critical input for global steel production. Yet the deal’s success hinges on navigating regulatory hurdles and market uncertainties, creating a high-stakes scenario for investors.

The Deal’s Mechanics and Market Dynamics

The acquisition involves Forge purchasing 3,963,807 shares of Aion Mining, representing 20% of the company, to be paid via two tranches:
1. 1,741,804 Forge shares at a deemed price of $0.91, subject to CSE approval.
2. $713,966.62 in promissory notes bearing 6.5% annual interest, due within two years or upon a $3 million+ financing round by Forge.

The anti-dilution clause is pivotal: it grants Forge an option to maintain its stake by purchasing future share issuances, safeguarding its controlling position. This mechanism is critical given Aion’s eight coal seams—four metallurgical and four thermal—estimated to hold 2.1 million tons of proven reserves. Metallurgical coal prices have surged by +40% year-to-date (as of Q2 2025), driven by China’s steel production rebound and India’s infrastructure boom.

Risks and Regulatory Realities

The transaction’s non-arm’s length nature—due to shared directors Cole McClay and Camilo Cordovez—adds governance complexity. While independent directors approved the terms, investors must weigh the potential for conflicts of interest. Regulatory risks loom large: the CSE must bless the share issuance, and Colombia’s environmental authorities could delay permits if commodity prices falter.

Forge’s prior miscalculation—overlooking 339,869 shares in its initial 60% stake—raises operational concerns. Correcting this oversight cost additional capital, highlighting execution risks in a sector where missteps can derail timelines.

The Strategic Calculus

The bet on La Estrella aligns with Forge’s broader pivot toward “high-impact, low-cost” assets. While its Alotta copper-gold project in Canada diversifies its portfolio, the Colombian coal asset offers immediate earnings potential. Key data points:
- Metallurgical coal prices: $320/ton in Q1 2025 vs. $230/ton in early 2024.
- Global steel production: Expected to grow by 3% in 2025, per the World Steel Association.
- Colombia’s coal exports: Up 18% YoY in 2024, benefiting from proximity to U.S. and European markets.

Conclusion: A Double-Edged Sword

Forge’s move is a classic risk-reward play. On one hand, securing an 80% stake in a fully permitted coal project at a time of surging demand positions it to capture margin upside. The anti-dilution clause and interest-bearing notes mitigate some financial exposure, while the project’s 2.1 million-ton reserves offer scale.

On the other hand, the deal’s success depends entirely on regulatory approvals and commodity price stability. If coal prices retreat below $280/ton—a likely scenario if China’s steel demand cools—the project’s economics could deteriorate. Investors must also consider Forge’s leverage: the $714,000 in notes adds to its balance sheet strain, especially if the company cannot secure the required financing by 2027.

The valuation by Evans and Evans, Inc.—while credible—does not account for geopolitical risks such as Colombia’s internal stability or global energy transitions. In a sector where 60% of coal projects fail to reach production, Forge’s gamble requires both skill and luck. For now, the stock’s 12-month volatility (measured at a 25% annualized standard deviation) reflects this precarious balance.

In short, Forge Resources has placed a significant bet on Colombia’s coal boom. Investors willing to tolerate high risk may find value in its leveraged position, but the path to returns is fraught with execution and market uncertainties. As the old adage goes: in mining, the only sure thing is uncertainty itself.