Many of these little pieces of analysis and thinking could come...

Many of these little pieces of analysis and thinking could come into the forefront if the bidding setup gets interesting soon enough. We have to know what we are playing for. Of course, only if the management does not let us down by not recognizing that COOL is purely an asset play on the other side of the credit cycle peak. The bidding stage has to be managed properly.

At this stage of the macroeconomic cycle, actual mining is generally a big boys' game because of cost of capital effect on NPV and the enormous needs of capital. Post 2 again for reference. Management of most small miners should recognize this, that unless they have already broken through, the best they can hope for is an asset sale to one of the big boys - of course, provided that they have good assets in a place that is of interest to the big boys (such that a bidding process can be organized with at least two strong bidders). We are lucky that at current prices, COOL has outstanding Witbank assets and very interesting large (though undeveloped) Botswana assets. Almost surely, the Witbank assets are in a place interesting for the big boys.

We also have more safety net than other juniors because we produce at this stage of the cycle. If we are run into trouble with short term liquidity there is always De Witt assets, a small treasure for many other local players. Cool should always be able to borrow (or raise capital) some money against De Witts assets. If De Witts wasn't still in COOL's hands, I would have been more careful about this safety net aspect of COOL.

Why is De Witts attractive locally? Carry a mental exercise. Think of any one of the cooperative owners/partners at RBCT - Anglo Coal, BHP, Exxaro, Xtrata or Glencore. RBCT has an annual capacity of exports of 91mt while currently only about 65-67mt are being exported; so there is plenty of spare capacity. Each of these miners have huge influence on Transnet and can easily arrange for a few more metric tonne of rail allocation. They all have existing interests in Witbank which will have economies of scale /complementarities with COOl's De Witts assets. Further (importantly), each of these players are financially much bigger and stronger, and have much lower costs of capital. They can also raise larger sums of capital than Continental cool much easier. Any one of these miners can come and buy De Witts and because of all these additional economies of scale/ complementarities/ influence/ RBCT spare capacity/and ability to raise finance at much lower costs, they can bring DE Witts to production cheaper and quicker than COOL. And then ship production to India for a profit. They also make additional money from handling charges for exports from RBCT- they would love higher volume through RBCT. Obviously, to any of these bigger players, De Witts assets now have value much higher than in the hands of Conti. If Conti tries to auction of these assets, at the worst (if Cool management cannot manage enough bidders to an auction), let us say (just a reasonable guess from Conti's cash flow projections) that De Witts assets fetch $40-$60 million(should be a lot higher with more bidders). This is enough to meet remaining Mashala payment, reduce debt and liabilities and hunker down for the next ten years. Cash flow should improve as debt/liabilities are less and they may even be able to give dividends over time in a hunkered down mode while progressively selling their other non-developed assets.

This above paragraph and the attractiveness of De Witts is also the reason I don't bother too much about the timing/availability of the Vanmag proceeds unlike the Aussies (I do agree though the handling of Vanmag since 2009 has been a real embarrassment for Conti Management).

All the above arguments tell me that the safety net level should at least be close to current market prices. I am not playing COOL for the safety net aspect. I am playing the NPV game and the aaset sale game. I am playing an interesting short/medium term potentially high reward/risk setup where risk is defined to be small by the safety net aspect. I will be upset though if the bidding process is badly managed even though the safety net is there.

Aside, a not very important but curious intellectual question - can the Vanmag proceeds delay be because of the worries over new BEE partners for the Chinese buyer? Remember post 3. Thanks and sorry again for a long post.