australian article

BUSTLING Balamara Resources boss Mike Ralston has taken to wearing red-and-white check shirts in homage to Poland for it again providing the Perth-based Balamara a shot at the big time. Balamara Resources (ASX:BMB) Already home to Balamara's Bogdan copper exploration project, hard up against KGHM's Lubin-Malomice mine, the central European nation that gave the world communism-buster Lech Walesa, the tripe soup flaki and some of the best vodkas has served up Balamara (ASX:BMB) what Ralston reckons is a "tier-one" project - the Nowa Ruda coking coal project in the southwest, near the border with the Czech Republic. Now, Ralston's version of a tier-one asset would not pass muster with BHP Billiton or Rio Tinto. But it doesn't have to, given Balamara has a market capitalisation of $28.5 million (328 million shares at 8.7c each). Ralston's version of a tier-one asset is one capable of generating earnings (EBITDA) of more than $US100m annually, and one that comes with low operating costs, size and scale, long life, access to existing infrastructure, and low sovereign risk. Nowa Ruda makes the grade on all of those, albeit with lots of work to do. All the better, then, if such an opportunity can be secured for as little as $US600 down. That's exactly what Ralston has managed. The $US600 payment to the Polish government secured development rights to Nowa Ruda. Or more correctly its redevelopment. It was a producing mine for much of last century, including a period under Nazi ownership, and only stopped in 1995 when prices for the black stuff and years of under-investment took their toll. According to Polish estimates - which are not stock exchange-compliant for Australian purposes - there is plenty of coal to be mined. The Poles estimate 105 million tonnes, of which some 15 million tonnes sits in the so-called A+B category (Poland's version of reserves); 50 million tonnes in the C1 category (Polish indicated resource); and the remaining 40 million in the C2 category (Polish inferred). What's more, Nowa Ruda comes with the production-ventilation shafts and the underground development that would be expected from a mine that was producing until 1995 at an annual rate of up to 1.2 million tonnes. All the required surface infrastructure such as roads, rail, power and water are available at the mine gate. Still, 18 years out of action - and the ratting out of gear and equipment - means there will be lots of work to do. Ralston is working towards having a full-blown feasibility study into the reopening of the mine by the second half of next year. What is known is that other underground mines in the region produce their coal for about $US75 a tonne. Part of the reason for that super-competitive cost is labour. There is lots of it and it is cheap - about $US30,000 annually for an underground miner compared with multiples of that here in Australia. It goes with its namesake town falling on hard times since the mine closed. Unemployment is high and by all reports the locals are keen to see it reopened. That is despite the mine having been a heart-breaker on occassions for the local community. Hundreds of miners were killed in methane gas explosions in 1931 and 1941. Fortunately, modern day de-gassing techniques in "gassy" mines means they are not the danger they once were. Assuming the feasibility work confirms that, say, 50 million tonnes of the remaining coal resource can be converted into mineable material, planning for a two-million-tonne-a-year mine good for 25 years or more would seem to be on the cards. At current coking prices of $US155 a tonne, Balamara would be looking at an operating margin of about $US80 a tonne, putting it comfortably ahead of Ralston's tier-one requirement for annual EBITDA capability of more than $US100m. It is more like $US160m, actually. That sort of potential will help Balamara overcome what will be its main hurdle in redeveloping Nowa Ruda - the $US100m in capital needed to make it happen. Also working in its favour is the fact that there are four coking coal plants within a 100km radius. Nowa Ruda has supplied them historically, and considering some of them are now reliant on coking coal from the US costing $US175 a tonne after shippage, a local and well-known brand of coal is bound to be well received. And while Nowa Ruda is very much Balamara's focus, it might be worth keeping an eye out for results from Balamara's latest exploration efforts at the Bogdan copper project. Some results are about due based on what the company has said previously.

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