The business model I see CNX implementing looks [to me] more like a franchise model rather than just a technology model. It is the royalties which make the difference.
Although I will readily agree with you that JVs will produce much bigger deals something to consider about that model is it is also a much more expensive and risky approach. Part ownership in every project also means taking on part of the risk of each project, it leads to a much bigger overhead in terms of the workforce headcount and finally it requires putting in a lot more capital.
Even modest royalties will set this Co up for a prosperous future ... so long as they write more than a handful of deals.
With a steady underlying income, as kevjb says, CNX can also develop suitable projects in its own right. That was how the Co initially approached UCG and if the Qld Govt had not kyboshed it the power generation might already have been ramped up. The recent ann outlining CNX's prospects also talked about fertilizer ... and so on.
I do agree with you that, short term, money is going to be tight for CNX. When I started buying I factored in the possibility of CRs before the revenue takes over. To my eyes the cashburn is reasonable and they are containing costs quite well. If the Qld Govt decide to 'green light' UCG any time in the next 12 months then I think CNX can avoid a CR IMO.
However, I do not agree with you that CNX is 'dependent' upon the Qld Govt ... the UCG business potential is bigger than that.
CNX Price at posting:
3.1¢ Sentiment: LT Buy Disclosure: Held
