canaccord bgf report, page-4

From the Canaccord BGF report:

Strong Cash Margins From Proposed
Anthracite Development
Investment Perspective: ZYL offers a rare opportunity
anthracite coal, which can be a lower cost substitute for
some uses. The Company has JORC resources
projects in South Africa that could produce 0.6 Mtpa initially
2013, lifting to 1.8 Mtpa over the subsequent
first project, Mbila, is fully permitted for production.
The Company has received non-binding expressions
to 4 Mtpa of saleable product, 2.3 Mt for its Mbila Products targeting
the domestic market, and 1.7 Mt for its Kangwane
targeted at the export market. The Mbila low phosphorous anthracite
keenly sought to replace expensive imports
African consumers. Domestic sales places ZYL
position of not being burdened by infrastructure issues prior to
establishing a profitable operation, while further upside will come at a
later date when it seeks export sales with higher
Domestic sales offer cash margins in the order of 115% (revenue
$115/t). Export sales could increase cash margins to
$150/t).
The share price has been softer in recent weeks, perhaps due to the
market waiting to hear of financing plans. A number of debt funding
proposals have been received and are being assessed, ahead of a
decision on the equity capital component. Clarity on the funding will be
an important catalyst for the direction of the share price.
Our analysis gives a Net Asset Value of $399
share on the current structure. Ramping up of production over the next
2-3 years sees the EV/EBITDA multiple of only 1.7
plenty of room for upward appreciation of the share price.
Given the scarcity of low phosphorus anthracite and the compelling
project economics, we would expect ZYL to be
target. A significant catalyst for the share price wi
the Mbila BFS in the current quarter, and clarity on the funding
methodology. We rate ZYL as a BUY.

PS...Canaccord BGF are no lightweights either, with Warwick Grigor one of their founding partners.