a request to bigbillbrown, page-6

Thanks Bigbillbrown, Very kind of you to reply.

My objective was mainly to find a simple enough theoretical solution to the holding company funding problem.

Stake buying is a quite a common method of buying resources in the coal industry. I agree that putting large cash figures for a 26% stake (and as you say, it should be a little less for majority stake holding reasons) is risky and speculative, especially for a distressed company. But, then again it also could be high enough because the recent article states that the Indonesian company has resources of around 1 billion tonnes and Tata Power's 26% stake was next day valued at $137m. Conti's South African (I am leaving out Botswana here) resources are about 600m tonnes, Tata's Mundra and Trombay operations are closer to South Africa than Indonesia, and South African coal is better in quality and valued higher. Even the weakness coming from the distressed selling aspect may not be as important if there are two or more strong Indian bidders looking in.

Coal of Africa is also an enigma to me. Recently Exxaro refused to take up their options to buy a stake of 30% in some of their met coalfields. Is it because the coking coal resources are located in the more undeveloped Waterberg Limpopo region that makes their met coal resources undervalued by the market? Why don't they get their thermal coal resources (closer to Witbank Mpumalanga region)sold off? Is it because they produce some cash flow while the met coal resources are developed? On the whole, I think Coal of India is very undervalued - the Chinese recognized it.

Low profitability concerns for Conti assets is largely driven because of high cost of capital (including high financing costs) that Conti has. Lowering these costs is essential.

I agree that lot of what happened in the past with Conti management should never have happened. There are not only large errors, but ethics maybe an issue too.

Thanks again Bigbill. I always look forward to your posts.