1) Most of this deal was already done last year with ICT, ie. The tonnages and 6% discount (this has changed and contentious).
2) Due to the fact there is nothing binding / no guarantees in place for Cokal to sell to ICT - No companies are willing to sign directly with ICT in a multi-year contract if they technically own nothing and really are just a shell company. Ie. Cokal (though they won't) could change their coal marketing company at any time. So without the guarantee in place, ICT can't broker a deal.
3) 6% hurts alot more when prices are currently this high, but it seems on-par with others - the benefit is ICT will give us the money upfront which will greatly improve our cash stores and money flow to expedite the development of BBM and hopefully TBAR (which isn't included in this deal).
4) The contention arises with the change in terms over the 6% and transparency around it. Rather than a 6% of what the coal ends up selling at in market, the deal has changed to: 'Cokal recives spot price based on an index' giving ICT the ability to scrap more cream off the top if they can.
In Summary:- ICT is worthless and can't do a deal without the 'guaranteed' clause in place.
- if this deal fails, we get no upfront $$$ to remove overburden, develop the site further and extend into TBAR without ICTs upfront assistance as last year's deal with them is worthless without the guarantee.
- TBAR is not included in this equation but we are stuck seeking coal via ICT for 8mil tonnes over a period (which is going to happen anyway due to the fact Karan and Eddie own the company)
- the price is adjusted accordingly
- if there is a lag with the spot price we receive (-6%) and when ICT actually sell the coal, in a rising market they could possibly benefit - nothing rises indefinitely, so this could actually work against ICT in some cases.
- I'm voting Yes, taking the emotions out of it - for me it's about producing as quickly as possible in these elevated prices and having a decent upfront warchest$$$ to push aggressively into TBAR. So what if they skim a bit more than the 6% of spot price.
just my thoughts.
CKA Price at posting:
16.5¢ Sentiment: Buy Disclosure: Held
