re: Ann: Completion of Due Diligence and Noti... Lister, it's...

re: Ann: Completion of Due Diligence and Noti... Lister, it's not a typo as it's in the IER report from BDO as well. It also says that the entire deal is contingent on this payment/issue which isn't revealed anywhere in the company's announcement or resolution explanation. From they way it's presented the resolutions stand alone. It will be interesting to see what happens if resolutions 1 and 2 pass and 3 doesn't.

I've long been concerned about the Pakar deal and would have prefereed an outright buyout of KRL and it's assets from Bayan. This exerpt from the IER did not instill a lot of confidence in me

"The coal is at the lower end of coal quality in the international market and is considered an ?emerging?
market rather than an ?established? market. The marketing information indicates that there is a current
demand for coal of similar rank to that of Pakar North (Figure 4) but this coal needs to be used as a
blending coal with compatible higher rank coals in order to produce a blended product suitable for
power generation. Pakar South coal is of lower quality and as such has limited market potential at this
time."

That's right folks read that last sentence again."Pakar South coal is of lower quality and as such has limited market potential at this time" So forget the BS. Value of however many gigtonnes of soggy, low evergy crap from Pakar South = $0. Wouldn't matter if they came up with a proved resource of 10 billion tonnes of it. If you can't sell it for more than it costs you to dig it up it's worthless.

Given that Pakar South is responsible for 287 of the 444 Mt of reserves the above is a bit concerning. It gets worse. Of the 3.1 Billion tonnes estimated at Pakar 2.6 Billion is in South Pakar. As far as I can tell the best concession of the whole project is TJ and we ALREADY HAD 49% OF THAT! It will take a rise of 5-10% in the price of thermal coal before Pakar South becomes viable. Note also that a reduction of 10% in the coal price would see only about 100 Mtonnes of the entire project being left viable.

I see the high value placed on the project but I can't help but feel some of the assumptions used to derive these figues are guilding the lilly quite a bit, like pro-rating coal value based on the Newcastle index around $95/tonne of 6300kcal/kg coal. It's a bit like saying, if someone will pay $100 for a pair of shoes they would pay $50 for one shoe.The fact is one shoe is about as useful as 2800kcal/kg coal. This sentence from Wood Mackenzie Ltd in their marketing report for the Pakar project in 2010 for IBU pretty much sums it up;
"WML is of the view that the current short term market has strengthened as a result of recent signs of recovery from the Global Financial Crisis of 2008/09 but identified 3,800kcal/kg(gar) as a potential market ?psychological energy floor? in the current market."

Anyway... somehow finding this "gem" and persuading IBU to part with it is regarded as worth $50million. Or maybe maybe the value was in getting Bayan to buy it and get a controlling stake in KRL as part of the deal. I'm happy to have Bayan on board but I'm not thrilled that in order to have them we have to get stuck with the whole Pakar project and fill someone's pockets to the tune of 11% of the company for "facilitating" the deal. What good are the company directors if they need to lose 11% of the company each time they strike a deal because they can't do their own negotiations.