Ann: Progress on Regulatory Approvals, page-42

Below is a list of peer coal stocks on the ASX. The question that needs answering is what will trigger a re-rate for AKM?

1) We've just added Mick Avery to the board. TER the company he helped found has a mc of $820m as of this morning
2) BCB have started shipping met coal from the Bowen Basin and in a few years should be on a 5mtpa of saleable coal.
3) CKA have just barged their first coal down river. Targeting 2mtpa (half that of AKM target) they are producing a 60/40 split of coking coal to PCI. They only own 60% of the resource so attributable annual tonnes are 1.2mt. They are trading on a $153/t for their 1.2mt. Based on AKM 4mt production, if it were at the same stage a suitable valuation using the CKA metric would be $153 x 4mt = $612m aud. However we are much earlier in the timeline.



As we move along the timeline below the project starts to de-risk further. A rule of thumb I personally use is that a DFS is worth around 20-25% of NPV and a DFS with funding secured is approx 35-50% of npv i.e. I think it is a reasonable risk reward for me to buy quality projects below these levels. 30% of NPV is approx $300m usd or $440 aud.


The pre-production drilling is complete, which will feed into the DFS which should be completed h1 23. It is probable that the capex will be higher than previously reported but it is also possible the npv could be higher based on current pricing.

Funding - Mr Tserenpuntsag has said he will provide loan guarantees of $100m aud. That is a solid vote of confidence. Nobel is a coal trader, so with their position on the Board, one might guess that they might want offtake agreements. The majority of the Capex is to build a nation building road that will be a public asset. I'd hope that there may be some infrastructure loans that we might be able to tap into.

So by the end of 2023, if we have a DFS, offtakes and funding, what is a fair value for AKM?