Chart, page-37

The Bengala Mine is a long life, low cost operation with stunning simplicity and excellent economics. The current price reflects pessimism that is not warranted by operating numbers. Coal is a dirty word - no doubt about it. BHP & RIO et al have declared no further investment in coal projects regardless of returns and banks are loathed to provide new funding for coal given the shift in global sentiment. Capital is hardly flooding the industry and supply won't be growing in a hurry. The base cost of the Bengalla mine is around $40/tonne which is at the bottom end of the cost curve, and NHC's New Acland mine adds option value should approval be granted - which seems more likely with the recent re-election of the coalition government. Politics, rather than economics, may be responsible for NHC's lower share prices, with ideology rather than profits motivating the swift exit from coal production.

NHC continue to accelerate production and reduce costs, leading to margins and cash flow remaining strong which is not reflected in the current share price. It is clear that coal is facing inevitable existential threats with fewer coal generators are being built. Yet high-quality coal from Bengalla will still be needed to feed ultracritical generators in Asia for many years to come. NHC has wasted little time improving operations, having already announced that the mine will produce an annual rate of 10m tonnes per annum rather than the long established 9m tonnes.

Analysts have this valued at closer to $5/share should the New Acland mine be approved and closer to $4/share should it not. A potentially significant mispricing opportunity presents itself at present.

All IMO