dear guffers, your thoughts please

I am a CAP shareholder, mainly focussed on their iron project, but I couldn't help but throw together a couple of psots on Hughenden as we are your 20% JV partner in the project. I was looking at CAPEX and Potential Earnings.

Your thoughts?

100% agree with you both there Boofy and Ildsrud.

Ildsrud, interesting point about the FS costs at Hughenden. It will probably be around that $20M mark, so ~ $4M out of CAP's pockets, but I think the big time cash will be needed in the CAPEX costs of the mine. $4M should should be chump change for CAP if they're serious about things, but to give a very rough indication how much our net costs for CAPEX at Hughenden might be, take a look at these other thermal coal mines.

Continental Coal is a thermal coal company based in South Africa, and over the next year or two are planning to develop a mining complex (De Wittekens) capable of up to 7MTpa of production. While the company is expending cash elsewhere at other projects, one would assume a significant amount of money is being expended at this project. Development costs over the next two years are expected to be around $190. I dare say about 75% of this cost is going towards this project in particular, so around $150M to develop a mine capable of 7MTpa.

Bathurst Resources have a project with 1MTpa expectations. The catch here is the product is hard coking coal, so it is obviously alot more expensive, but it is a number to work with. CAPEX of $57M.

From what I can gather, NuCoal are developing a mine for upwards of 10MTpa of soft coking/thermal coal, and the CAPEX is $500M.

Rey resources are developing a 2MTpa mine for export quality thermal coal. CAPEX is $103.

So it appears as though the CAPEX ranges anywhere from the low $20M/MTpa to over $50M/MTpa depending on the product at hand. The softer, thermal coal is going to be cheaper to develop, however the product is at a considerably cheaper price compared to the hard coking coal that goes into steel.

Now I have no idea what the potential at Hughenden is. I've heard 20MTpa thrown around before, but that is a faint note in my mind. If that is true, CAP would be looking at 4MTpa. Considering the Hughenden product is thermal coal, you would be looking at CAPEX around the $20M to $30M per MTpa; or around $80M-$120M in CAPEX for CAP's net stake.

Bear in mind that our project is Australian based, and naturally costs will be a little higher than in the African continent where their economy allows for cheaper development. However also remember that Hughenden is in a coal haven district and infrastructure will be close by.

Anyways, at least that's a ballpark figure to work with. Around the $100M mark...

Just to throw something else out there, and this is ENTIRELY speculative, so don't hold me to anything, but bear this thought...

I grabbed that 20MTpa figure from the GUF forum a fair while back if I recall correctly. So that would yield CAP 4MTpa. I know DavidCasey often refers to how CAP is undervalued when it comes to the coal, and I actually agree with him entirely having given it a thought.

It would be more than reasonable to expect a $40/tonne margin on thermal coal in my opinion. Now using that highly hypothetical figure of 4MTpa, we could make $160M in earnings each year before tax. After tax it's about $110M profit. Now Hughenden is expected to be pretty big, upwards of 1Bt going by a GUF broker report released about half a year ago. A resource that large would therefore enable a mine for at least 25 years, maybe 30+ years? I think it would be more than reasonable to give a P/E of 12 based on this hypothetical mine life.

That would give CAP a net EV from Hughenden of $1.3B.

Amazing stuff when you think about it!

What are we doing with a market cap of $60M!?!?