It is always interesting to read the Key commercial terms in Project Acquisition statements. The above link is to CPL's acquisition in Canada.
The performance share terms clearly point to CPL becoming a producer. ie Performance Shares for a Positive Feasibility Study and shares for 1mt coal sold etc. CPL must also pay $16 million once certain mining milestones are reached.
The interesting Milestone in CPL's statement is the issue of performance shares once 400Mt of coal is delineated. Performance shares issued after 400MT only relate to Feasibility studies and mining milestones.
TRH's commercial terms do include a payment of 10 cents per Tonne on Proven JORC reserves. There are no Feasibility study or mining milestone payments (Except Royalties). The final issue of Performance shares is based on a Thermal coal resource of 2 Billion Tonnes. How does that compare to CPL's acquisition statement?
2004 Source:MINING AND ENERGY PLANNING UNIT (UNIDAD DE PLANEACIN MINERO ENERGTICA - UPME) Carlos Arturo Florez Piedrahita General Director
"Coal. There are three coal areas in Cordoba department, located in the municipalities of Puerto Libertador, Montelibano and San Carlos. Coals are found in Cienaga de Oro and Cerrito formations, of the Oligocene and Miocene eras, respectively, and they are classified as sub-bituminous type B and C.29 According to the Ingeominas preliminary information, in 2002 the coal resources and measured reserves totaled 381.000 kt. In last years, the coal production has ranked from 63 kt to 204 kt, production volume considered marginal if compared with other country regions. This coal is entirely destined for supplying the Cerromatoso ferronickel plant and the Caribbean cement industry."
Coals are found in Cienaga de Oro and Cerrito formations. Looking at the TRH Concessions and the scale provided, it appears that the strike of these coal bearing formations is over 150km. The 2 Billion Tonnes of thermal coal almost looks understated.
The market is telling me that the Project is a dud or TRH are not Progressing with it. I estimate that $3.25 Million Enterprise Value is attributed to the Project if the Deal and Placement progress. There are some assumptions in that calculation so DYOR.
Is this fair value considering HDG's EV was 5 times that amount on Friday? They are only completing DD on the project.
TRH Price at posting:
35.0¢ Sentiment: None Disclosure: Held
