bgf equities coal sector analysis - add

Here are some excerpts from the BGF Equities Coal Sector Analysis report issued February 2010, where ADAVALE RESOURCES LIMITED is listed:

Supply & Demand 2010

Thermal Coal - Global import coal demand levels in 2010 are expected to be similar to 2009 at around 700Mt, with real growth in volumes returning in 2011. While China is expected to remain an importer, higher international prices, consolidation and improving efficiency in its domestic industry may constrain volumes to around current
levels of around 60-70Mtpa. India is where the real growth in demand is expected, with imports growing by perhaps an additional 80Mt by 2020. Germany and Turkey
are also forecasting growth in imports. An initial tightness in supply may occur as producers move to ramp up to full capacity as demand accelerates.

Price Outlook for 2010

Prices in 2010 are expected to rise in response to some tightness in supply, but without the volatility seen early in 2009 where contract prices spiked at record levels.
Contract thermal coal prices are expected to rebound in 2010 from the 2009 slump to around US$85/t for Japan export coal from Newcastle. Newcastle spot prices are
currently around US$98/t. Contract coking prices will rebound from the 2009 slump with headline prices for premium hard coking coals (HCC) likely to be above US$150/t, semi-soft coals (SSC)at US$110/t and pulverised coal injection coals (PCI) at around US100/t.

INTERESTING #1 ADAVALE TRADING AT A SIGNIFICANT DISCOUNT

Adavale is currently trading at around a 75% discount to asset valuation (page 2). Compare this to a company such as Strike Resources Limited (SRK), which also has thermal coal operations underway in Indonesia. SRK is trading at a whopping 400% premium to asset valuation.

INTERESTING #2 JORC

Adavales inferred resource of JORC is listed on page 5 of the report. Interestingly, ADD's JORC is bigger than SRKs.

Happy to be in ADD.

Report can be accessed at http://resgen.com.au/static/files/assets/39c846bf/BGF_Coal_Stocks_Monthly___Jan_10.pdf