amaam shows potential for earlier production

07-Feb-2013
Morning Report\Fosters

Tigers Realm Coal (TIG, $0.215, Mkt Cap $98M) North Amaam shows potential for earlier production. Buy PT $0.30/share.

Today’s Top Picks.

Tigers Realm Coal (TIG, $0.215, Mkt Cap $98M) North Amaam shows potential for earlier production. Buy PT $0.30/share.

•Tigers Realm this week announced the results of its first drill holes in its North Amaam project (TIG earning 80%). Simply put, this project can be a game changer for the company. While its more advanced Amaam project (80% TIG) is a sizeable resource (412Mt JORC) of high quality metallurgical coal, and of close proximity (30km) to the coast for export, time to production is long dated (we estimate 2017) and a port is needed, making capex substantial ($1.5b) for a 5Mtpa mine.

•However North Ammam is 35km from the existing port of Beringovsky, which greatly reduces capex. While still early days, historical drill holes indicate the coal to be of high coking quality, with FSI analyses ranging mostly from 7.5 to 9.0 from the past analyses. Tiger’s own holes showed excellent seam thicknesses.

•Furthermore, there is a probability that a significant portion of Amaam coal may not require washing – unlike North Amaam – thereby greatly reducing costs and capex. Historical analyses from a couple of holes displayed ash levels mostly below 10%. The company has target of 25-300Mt open pittable resource. Tiger is targeting cash cost under $100/t. For a production of up to 1Mtpa, we estimate capex could be under $100M.

•We have compared Tigers Realm with some other pure coking coal explorer/developers, and estimate an EV/t resource of $0.40/t at this stage is appropriate, yielding a valuation of $0.30/share.

•We recommend TIG a Buy, PT $0.30/share

http://www.fostock.com.au/announcements/tigers-realm-coal-tig-asx