broker comment, page-5

Just a broker comment from Aspect Huntley. Does anyone know what the Bee Creek resource is which is probably 100-200mt of 'high' quality cokin coal? That could be exciting in my opinion.

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The thermal contract settled at US$70/t during the global financial crisis. This could be the new low water mark barring the demise of the China led commodity story. Raising the long term coal price forecast to US$70/t increases the valuation 15% to $5.00 a share. NHC continues the search for acquisitions of up to $2bn. The preference is for operating assets but buyer competition means value is hard to find. NHC will return cash to shareholders if a suitable investment can?t be found. Further fully franked special dividends would not surprise. The company has more than sufficient capacity to fund current growth options. Operating cash flow sufficient but the cash pile expands options. Base investments include continued expansion of Acland and exploration around Acland in the Surat Basin and at Bee Creek and Lenton in the Bowen Basin. NHC has outlined a 100-200Mt resource target at Bee Creek which is expected to contain higher value coking coal and PCI fractions. Acland is an attractive default investment option. The relatively low risk expansion to 4.8Mtpa came on ahead of time in February and below budget. The company is looking to ultimately move to 10Mpta but this will depend on rail capacity. Expansions are likely to be in small steps as capacity becomes available. NHC views itself as an energy company and will maintain exposure to the coal seam gas sector through Planet Gas. The company continues to evaluate coal to liquids technology as a way to monetise coal, increase expansion opportunities, avoid infrastructure bottlenecks and attract a premium energy price in line with oil. Net operating cash flow was negative $503.3m compared to positive $100.3m in the pcp. NHC paid $769m in taxes during the period, mainly relating to the once off $2.4bn pre-tax profit from the sale of New Saraji to BHP in FY09. The interim dividend increased from 4.75c to 5c fully franked. The balance sheet is excellent with $1.40bn in cash and no debt, down from $2.63bn in the pcp. The reduction reflects $789m of tax and $639m of dividend payments. A further cash boost will come in August 2010 with the Shell/PetroChina bid for Arrow Energy. NHC will accept the bid in the absence of a superior offer. The shareholding is worth approximately $600m and could see the cash balance approach $2bn by early FY11. NHC paid $119.3m for its Arrow investment."