cok comparison with bnd

With shares hitting a fresh low - I looked at some analysis on COK and in my view the most comparable stock - Bandanna Energy. Mkt Cap on COK is $157m and BND is $150m based on 1 Aug closing prices.

There are well publicised reasons for coal stocks across the board to be beaten down at present - but I would conclude on the below that on a comparable basis COK has been over done.



- COK is currently producing aroung 650,000 tonnes of PCI coal whilst BND is not scheduled to commence production until FY14.

- COK's expansion plans in the Bowen Basin already have a 20% partner (JFE Shoji) and there is the view that as part of the expansion they will sell an initial 17.5% equity stake for between $50 - $100m (Credit Suisse view).

- Expected cost for COK Baralaba expansion is $450m - for which at 62.5% ownership COK would require $282m. Cash at 30 June 12 of $97.5m.View is remaining capex is likely to be funded by project debt financing and an equity raising early 2013.

- COK has signed 10yr contract with QR National for 3mt pa form Baralaba from 2014. BND has rolling 10yr 4Mtpa allocation at WICET1. BND has signed 10yr contract with Pacific National for 4Mtpa.

- For BND expected cost of Springsure Creek of $750m - so will need to raise funds through a sell-down, secure project finance debt facility and raise additional equity. Cash at 30 Jun 12 of $115m. The PCI/thermal split of SC is similar to Baralaba.

- Beyond the initial Bowen Basin plan for BND - the South Galilee project is the focus. Currently there are no coal mines in the Galilee Basin nor is there any rail connection to Abbot Point. (requires about a 500km construction). However, and importantly, the most advanced project proponents in the Basin, Hancock Prospecting/GVK and Waratah/Resource House, have indicated their preference to see a rail connection to Abbot Point. The QLD govt recently gave approval to 2 of the rail plans with an aim to be in operation for 2015.

- COK has secured 4.2 Mtpa allocation at WEXP1 for supply of coal from the Surat Basin from 2016. Intention is to initially load coal from the Collingwood project (which is 51% COK and 49% Mitsui & Co)

- Surat Basin Rail - Often referred to as the ‘Southern Missing Link’, Surat Basin Rail is a 214 kilometre railway that will boost economic development of regional Queensland, enhance the existing coal rail network and unlock approximately 6.3 billion tonnes of coal reserves in the Surat Basin. The Surat Basin Rail project is being funded by an Australian based Joint Venture comprising ATEC (Dawson Valley Railway) Pty Ltd, Xstrata Coal Surat Basin Rail Pty Ltd and QR Surat Basin Rail Pty Ltd. COK is 5% shareholders in ATEC.