btu the new hun - hot coal stock

Well, yesterday was quite significant IMO.

It was the day BTU came to the attention of a lot of investors/traders. It is not too dissimilar to Hunnu (HUN), which has recently gone from a 20c IPO to $1.20 in a matter of months. Some salient points:

Resources: HUN has potential for larger resources on its licences (in the 100's of millions of tonnes), compared to BTU (stated ~100mt). HUN's resources are not stated as JORC compliant, nor are BTU's, however BTU's current drill program will bring at least part of the resource up to JORC standard. Both appear to have had substantial drilling to date.

Quality of coal: This is the big difference. BTU is looking at coking coal in New Zealand which has a much larger profit margin than thermal coal which HUN is looking at.

Sovereign Risk: Mongolia has been part nationalising some assets over there in asking for a Government stake of up to 34% in some developments. New Zealand has the resources friendly John Key who is looking to fast-track resource developments. Its a developed country with no corruption or nationalisation risk.

Infrastructure: no secret that Mongolia has huge resources, the main hurdle has always been infrastructure. HUN's recent acquisition is several hundred km's from a railway line. For BTU - they are in NZ's main coal district and much closer to infrastructure including Ports.

Timeframe to Production: BTU state 18-24 months, HUN state by the end of this year, however their problem is infrastructure constaints so I would be surprised if it would be large tonnages.

Acquisition Costs: we don't yet know what the cost to BTU will be for the acquisition/JV in New Zealand. By the same token - HUN have also not stated what the terms of their acquisition is. In HUN's case they announced the acquisition and went on a run up to $1.20. BTU have announced a formal agreement is to be signed by the end of April. As such deals would normally involve placements etc it is in the best interests of the current owners/shareholders/directors/brokers to push the SP up as much as possible prior to the terms of any such placement being worked out. Which is probably why HUN also held off announcing the terms. The large rise yesterday and buying may be the start of a re-rating for this stock.

Of course HUN also have some other assets in NZ, however the recent acquisition appears to be the one where production will come from initially.

Cash: HUN is much better capitalised, so the risk with BTU is a placement in the near term. They did just raise $1m recently, however with the announced drill program a placement may be imminent.

Market Cap: $11m (BTU) to $130m (HUN).

Do the differences above justify such a difference? I don't think so. Even with the risk of a near-term placement I think BTU is a definite buy. Yesterday's buying is hopefully the start of a re-rating.