3rd or 4th lowest cost c coal mine on planet!!, page-2

Fosters new Research Report....

INITIATION - FAR EAST RISING
Event:
· We initiate on Tigers Realm Coal (TIG) with a Buy and price target of $0.66/share.
Investment Highlights:

· Emerging coking coal producer in Russia. Tigers Realm Coal has two projects located in Chukotka in far eastern Russia. The potential is huge, with existing JORC resources of 439Mt, and exploration targets highlighting potential for 1bt of coking coal.

· Amaam North (TIG 80%) - Direct shipping coal close to existing port is enviable. TIG has delineated 25Mt coking coal with Project F encompassing 13Mt – enough to
enable startup operation of 1Mtpa over 10 years. Pre-production capex is only US$52M, with TIG targeting first shipment in 2016. Minimal interburden and low requirement for washing means cash cost of US$75/t. We expect pricing similar to semi-hard coking coal. Our unrisked valuation of TIG’s interest in Project F is
A$0.36/share.

· Amaam (TIG earning 80%) - larger production, larger capex. Amaam is similar toAmaam North but for two key differences – higher interburden and absence of an existing port. However TIG has so far delineated 412Mt of coking coal and identified a lagoon for port development. 6.5Mtpa of saleable coal is targeted over 20 years. Preproduction capex is $1.3b. Our unrisked valuation of TIG’s interest in Amaam is
A$0.57/share.

· Low cost operations. We estimate Amaam North will lie in the bottom quartile of the seaborne coking coal cash cost curve, and Amaam on the cusp of the bottom and 2nd quartiles. Concerning pricing, we believe on average the coals will attract a discount similar to that received for semi-hard coking coal.

· The big upside – integrating a larger scale Amaam North with Amaam. TIG is examining scaling Amaam North to 3.5Mtpa and linking it via rail to Amaam for a combined output of 10Mtpa. We estimate the incremental value of a large scale Amaam North is A$1.82/share unrisked, based on TIG finding enough resources for a 20 year operation, or $0.95/share based on 10 years. The outcome of the current drilling campaign in early/mid 2014 will shed further light on resource potential.

· TIG’s local partners key to success in Russia. While Russia is perceived as risky, the Fraser Institute ranks it ahead of counties such as PNG, Mali, Mongolia, DRC, Philippines, and Indonesia in terms of attractiveness for mining.

· Mining licence obtained, regulatory approvals have been timely. To date, we note that TIG has received key regulatory milestones such the Discovery Certificate and its Mining License for Amaam within expected timeframes. This is a positive when compared to delays facing coal developers in countries, even such as Australia.

Recommendation:
· We initiate with a Buy recommendation on Tigers Realm Coal with a price target of A$0.66/share, equivalent to our risked valuation of the company. Our unrisked valuation is A$2.69/share. Our valuation of the three projects has been undertaken by DCF using a WACC of 10%. We assume long-term hard coking coal benchmark price of US$185/t and A$ of US$0.85.
· Key catalysts for the shareprice include Discovery Certificate and Mining Licence for Amaam North; Increasing Amaam North resource; .Securing funding for the short
term.

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