ccc growth projections

I believe it is timely that we reflect on where Contintental Coal is headed in the next 2 years.

N.B: Profit margins are sourced from the company's website and will obviously fluctuate both up/down depending on the spot price of thermal coal.

2011 Calendar Year Production

Vlakvarkfontein 60%WI
10Yr Mine Life
Margin: $7/t(D)
1.2MTpa(D)
$5M profit

Ferreira 100%WI
2Yr Mine Life
Margin: $7/t(D) and $35/t(E)
0.2MTpa(D) and 0.5MTpa(E)
$18.9M profit

Penumbra 100%WI [commencing Q4]
20Yr Mine Life
Margin: $7/t(D) and $60/t(E)
0.1MTpa(D) and 0.5MTpa(E)
$7.5M profit [Q4]
*$40M development costs (15month CAPEX payback)

2011CY Projected Earnings: $31.4M

2012 Calendar Year Production

Vlakvarkfontein 60%WI
10Yr Mine Life
Margin: $7/t(D)
1.2MTpa(D)
$5M profit

Ferreira 100%WI
2Yr Mine Life
Margin: $7/t(D) and $35/t(E)
0.2MTpa(D) and 0.5MTpa(E)
$18.9M profit

Penumbra 100%WI
20Yr Mine Life
Margin: $7/t(D) and $60/t(E)
0.1MTpa(D) and 0.5MTpa(E)
$31M profit

De Wittekrans 100%WI
30Yr+ Mine Life
Margin: $7/t(D) and $60/t(E)
1.5MTpa(D) and 1.1MTpa(E)
$76M profit

2012CY Projected Earnings: $130.9M

2013 Calendar Year Production

Vlakvarkfontein 60%WI
10Yr Mine Life
Margin: $7/t(D)
1.2MTpa(D)
$5M profit

Penumbra 100%WI
20Yr Mine Life
Margin: $7/t(D) and $60/t(E)
0.1MTpa(D) and 0.5MTpa(E)
$31M profit

De Wittekrans Complex (all 4 mines) ~90%WI
30Yr+ Mine Life
Margin: $7/t(D) and $60/t(E)
4.2MTpa(D) and 2.8MTpa(E)
$176M profit

2013CY Projected Earnings: $212M
2013 Q4 Share Price Evaluation
With all this in mind, and realising that we will earn over $200M in 2013, it's worthwhile seeing where this would value our company. Because of the massive expansion in projects, it is only fair that we include a risk factor of 25%. As our two biggest prospects, Penumbra and De Witt, are expected to last 20-30 years, we would expect the market to pay a PE of 12-13 in my opinion. We can also expect to have debt to pay off for the developments of Penumbra and the DW Complex. I would imagine ~$150M - ~$200M in debt wouldn't be unreasonable.

I would take the earnings of $212, multiply it by the risk factor to get a mean risked earnings of $160M. Give that figure a PE of 12.5 which would give our production an EV of $2000M. Take away our hypothetical debt balance of $150M, and we have a company worth $1850M. On our current registry, that would give us a value of 46cents per share. I must stress that this is quite conservative as the margins are based on current thermal coal prices, and by all reports these prices are set to rise towards $200/t over the next 5 years.

I don't care how much some of us on here want to bag management, if they can pull all this off within the expected timeframe, CCC will be worth $2B in value by the end of 2013, simple as that. Given that management have stated that they will not dilute the share register unless they are aquiring a producing prospect, it is safe to say that any more dilutionary effects on us shareholders will be offset by even more earnings flowing into Continental's cash balance. For the time being, I see no reason to be bailing on this stock. I will happily take 500%-600% gains from current prices within 3 years. Furthermore, if we are successful in Botswana, the rise and rise of AFR over the pasy 6 months highlights how much CCC could grow in value from that prospect alone. A mere handful of drill holes in their tenement has AFR valued at $300M+. Just imagine what an extensive drilling campaign on our part would do to the value of our tenements over there. As a final thought, I'll leave you with the below diagram which serves to show the dramatic growth in production that CCC is set to go under in the next few years. Ofcourse there are going to be blips on the radar along the way. You don't go about such an agressive transformation without some hiccups. Now, are you in, or are you out?