why cascade coal t/o may be an excellent deal, page-4

@Grebmoolb
Allthough you know me as being opposed to the Cascade takeover I think your 25-year projection is a bit over the top. The question is how long it will take until the acquisition pays off. If Cascade becomes unprofitable next decade I wouldn't care as long as Cascade will have contributed strong earnings for a couple of years before.
Given the excessive money printing by the Fed and the ongoing commodity rallye my fears of deteriorating coal price (in USD) evaporate more and more. However my new fear is that inflation may drive production costs in Australia to some extent.
Regarding capex I hope managment will find a way to evade another placement and so further dillution. Selling a small interest in the future mines to Asian utilities (as many other miners use to do) and some bank loan could be a possible solution. Also Peabody's option to acquire 14.9% in WEC may be executed one day, which would fill the company's piggy bank with a wad of cash. After the Cascade takeover (issue of 139m shares) and based on today's share price exercising this option would result in the issue of 79m shares and ~$226m in cash.
The price for Cascade seems to be high but perhaps that's what we have to pay for having an experienced world class management team, allthough a team of world class engineers would be of more use at this stage. I hope the dillution will be offset by the better success in marketing and rolling out BCB by these guys, who will have an even stronger incentive to make this company succeed after their stake in WEC has grown by the Cascade takeover. Just look into what a dubious company the dEEEserted former director Mr Ilyas Khan is involved today - I must say, in the aftermath we are lucky to have gotten him replaced by some serious managers!
Even if Cascade's fair value was only $250m this would mean the company would soon issue some 70m shares (or 18% of total shares) on top of fair value. Now look at share price which is down by 30% since last year's peak. I think WEC is totally oversold now and share price does not only reflect the high price of Cascade but it primarily involves a huge risk discount in the fear of Tabang not reaching nameplate capacity by mid-year.
Remember that the company won't pay those $ 486m in cash but 90% in shares - if there were serious fears of BCB failing management wouldn't accept shares in exchange for their Cascade stake. Also given their wealth, they wouldn't waste their time with a desperate business.
Allthough I purposely took the risk of BCB failing in exchange for the huge opportunites when I invested in the company and so being opposed to the imminent, arguable derisking we need to bear in mind that this transaction will provide hard assets to the company, that will limit downside for the stock and may also cheapen interest on future credits as there will be solid loan security.
Not to forget that Cascade could also bring some significant upside through discovery of additional resources and it could even suddenly turn into a proverbial goldmine if the company suceeds to apply BCB-technology to high rank coal in order to produce briquettes with coking coal specs (which would result in giant margins!). To my knowledge there are already trials underway on this at the Cessnock R&D facility.
Given the low share price I will increase my holdings now. WEC could easily make 100% by year-end if modifications in Tabang succeed until mid-year and despite my reservations about Cascade I still believe BCB will be the first and best coal upgrading technology for years and with Indonesia soon to legally require a minmum calorific value for export coal a lot of miners will be forced to upgrade their low rank coal.