I think we just need a little more patience. Like a lot of coal...

I think we just need a little more patience. Like a lot of coal stocks BRL has had a tough couple of years, trading profitability and cashflows have been poor due to very low coking coal prices and the LMCH court case posed a real risk to the solvency of the company. The share price has already tripled since June which mostly reflects the success in the LMCH court case. I still think BRL is undervalued, but the theme of my posts is that we may have to wait a few more months (at least Q2 in January) before we see some exceptional profitability and cashflows on the back of the current very high coking coal prices. Once these profits begin to be banked and the cash position of the company improves, we will likely start to see a return to shareholders via dividends/share buy backs.

BRL is not without its issues which have been mentioned by others:

• the LMCH arbitration - which I think is a much lower risk than the court case due to difficulty in LMCH proving their case, and the fact that the court case decision appears to set a precedent that the US$40m payment can be deferred as long as an increased royalty is paid, regardless of whether the mine is operating or not.
• the potential (likely) dilution of shares if the A$10m bonds are converted to shares at 49c. With hindsight it looks like a poor decision, but we need to remember that when this finance was put in place in Feb 2021, it was before the supreme court decision and at a time when cashflows and coking coal prices had been poor for around 18 months, at the time the 49c was a 30% premium to the share price and the current increases in coking coal prices were not known.
• BRL is a small cap NZ coal company which is thinly traded and likely not well known. It ticks all the boxes for being unfashionable...

I think the top two issues will play out over the next 12 months and whilst it will be good to get them out of the way, I don't think they should hold the share price back long term.

Longer term BRL has the potential to expand coking coal production both on the Denniston Plateau on the West Coast (100% owned) and at Crown Mountain in Canada (option to buy in up to 50%). Getting the required regulatory approvals for both may not be easy or quick but the long term upside of both is huge. I take comfort in the fact that globally obtaining regulatory approval for coal mining is getting harder and harder can only be good for the long term coking coal price.

I believe at some point the share price will lift, the market will decide when, in the meantime I am happy to wait.