Hi everyone, Firstly, I actually meant early FY17... ie right...

Hi everyone,

Firstly, I actually meant early FY17... ie right now! but couldn't change the title

With BRL 2016 annual report most likely to be published at the end of this year, I had a look over BRL financial statements for the year ending 30 June 2014, and note 10 was very interesting as they broke down their forecasts for Hard Coking coal price per tonne in USD, not done in 2015, and most importantly how a change in coal price could affect the fair value of the great Buller project... the same year they impaired their mining assets by 414m, most of which was due to the Buller Coal project no longer being viable (at then current prices).  The entire value of Buller was written off.

In the 2014 Annual report:
In 2017, the Sale price/tonne was estimated at $175
In 2018... $178
In 2019... $171 which continues onwards to 2023
These rates were not viable at the time, although BRL was ntoed as saying above $120 is now viable, I believe, due to efficiency gains (this year around $60 per tonne of coal cost) but in 2014, when BRL were alot less efficient, anything below about $200 (I feel) would have not been viable for them to start up the Buller Coal project.

Now to the important part, bottom of note 10 (in the 2014 annual report) it was noted:
A change of consensus price with all other variables held constant; would increase the fair value of the assets by the amounts shown below:
PRICE CHANGE:   +10%   +20%    +30%
Asset value (in use): $141.9m $244.9m $347.9m

Fast forward to today:
BRL still has a $0 value on the Buller project... ie they are valued essentially only on their domestic operations (which are now profitable, cash flow positive, and efficient)

Spot rate is up to $242.90 (on Oct 20) taking the coking coal rally to 210% this year (wow!), it was also noted that the quarterly contract price, was recently settled at above $200 (much more realistic indicator)

Lets say BRL can achieve a $210 contract price, this would be exactly 20% above their (well consensus) forecast for $175 for 2017 (in 2014)... so, if they were to mine it, we could all add on $245m to their assets, and I think this is realistic, if not even conservative!

I had a look over the 2016 Financial statements, added that asset value in, and got 28 cents per share Net Assets (965m issues shares - current), which is nearly as high as it was in 2013 (29 cents - when BRL had 669m issues shares)... the share price was nearly 40 cents around June 2013... it is common for shares to trade above book value, so my estimate of 28 cents represents no premium to theoretical book value.

This is so good I am worried RIM could try make a take over offer before things really take off (anyone know if they can convert those 3 year notes early? - this would give them an 'automatic' 33% I believe...)

Look forward to any comments! (I think I have the numbers right! - either way, it is certainly a lot higher than 5 or 6 cents a share)

And I haven't even begun to think about the exciting prospect of an acquisition any part of Solid Energy (which looks almost certain - for BRL to acquirer some part)... they may need to do a capital raising for this... and I almost hope they have to so I can try get as much of the excitement as possible.

References:
Current coal coking coal: http://www.reuters.com/article/us-column-russell-coking-coal-idUSKCN12L1FO
Bathurst Annual Report 2014, 2015


All figures in NZD