Important to understand the basics of the business.Module 1 of...

Important to understand the basics of the business.

Module 1 of the wash plant was only commissioned in May. Until then, they've been mining but they couldn't wash and sell the coal. While Bluff helped kickstart everything, cash flow from Bluff was obviously insufficient to fund the steep ramp-up of the 2 Burton mines (Broadmeadow East and Ellensfield South) + refurbishments (TLO, CHPP, camp).

They probably would have made it through without a CR, had the wash plant been ready two months earlier and without the rail and port congestion (caused by the flooding events earlier this year). And I do think they tried. The case also demonstrates that no banks are willing to provide short-term liquidity to coal companies for ESG reasons anymore, even in cases where they could get very good collateral (working capital).

The good news: module 1 of the wash plant is up and running, there is plenty of product at port and in stockpiles, and prices are holding up sufficiently. It appears the directors haven't been sellers for a while. Except for ML, who probably used the cash for other coal-related investments he recently made to broaden his reach (e.g. East Coast Rail).

The CR price of $0.17/share is definitely not reflective of BCB's value, but of the market's hesitation to put more money in when coal prices have been falling.

Perhaps it was a mistake trying to go from 0 to 5mt in 2 years. That said, the company is close to getting there and this was most likely the last CR. The Jul-Sep quarter should see a material uplift in sales and cash flow. And then there'll be another step-change in the Jan-Mar or Apr-Jun quarters, once the 2nd module of the wash plant is running. The Burton mines are very low cost at steady-state.

Things to look at when analyzing the numbers going forward:
1) Burton only started washing and shipping mid May
2) mining costs include an acceleration of BME and the start of Ellensfield South (first coal exp. in Sep)
3) capital sitting in stockpiles (= near term liquidity)
4) module 2 of the wash plant will increase Burton's capacity from 2.7mt to 5.5mt