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http://www.theaustralian.com.au/business/opinion/look-out-for-panoramic/story-fnciil7d-1226836310756

Coking Coal (Balamara Resources: BMB)

IT is a feature of the regular profit presentations of the mining heavyweights BHP Billiton and Rio Tinto that they don’t mind passing on information about commodities they like for the long term. It is highly paid advice that comes for nothing as their presentations outlining their commodity preferences are generally posted on their websites, or can be had from numerous investor websites.

This time around, there was agreement that copper was looking good, potash had (very) long-term interest, and coking coal could not be ignored.

Today’s interest is in the third, coking coal, mainly because the commodity and investor interest in it is down in the dumps, giving investment in the sector a sort of straw-hats-in-winter appeal.

Spot hard coking prices have plunged from about the $US150 a tonne level a year ago to $US112.50 a tonne last week, according to Platts Steel Index. Funnily enough, additions from new supply by BHP, Rio and others is to blame. But with global steel production continuing to reach new heights, and with low-risk and quality new development opportunities few and far between, the assumption is that things will tighten up soon enough to drive prices higher.

In the junior sector, a number of companies stand to benefit from the bullish outlook for coking coal, notwithstanding the current price malaise.

This column has mentioned previously plans by Balamara Resources (ASX: BMB) to restart the historic Nowa Ruda coking coal project in southwest Poland.

It’s the one that Balamara boss Mike Ralston reckons could be capable of generating earnings of more than $US100m a year, and one that comes with low operating costs, size and scale, long life, access to existing infrastructure and low sovereign risk.

Since the last reference here to Balamara in October, Balamara has marched from 8.7c to the 14c-a-share level for a market capitalisation of $46m.

Ralston has just sold Balamara’s base metal interests in the Balkans, which had become non-core with the Nowa Ruda acquisition, for a cool $15m.

It was an amazing price given the market here gave them negligible value.