On Friday Eastern announced it plans to purchase an existing...

On Friday Eastern announced it plans to purchase an existing coal mine in the north west of the south island adjoining their new Whareata field. This will give the company immediate and substantial cash flow.

Although I have not been to NZ to see their coking coal site I do have a fair knowledge of what is happening over there. The company is currently finishing agreements with the NZ government to mine the rich Whareata field. Remember these guys are experienced in setting up coal mines.

As I said in my previous post, this NZ field could be an absolute bolter. However the coal will be used by energy starved New Zealand and will not be exported to China, Korea or Japan. The NZ government wants this coal urgently and Eastern plans to be producing significant tonnages within two years.

The biggest problem facing coal miners and all miners in general nowadays is the acute shortage of mining equipment, draglines, trucks conveyor belts and so on. The waiting list for equipment I am told is getting longer every month. By buying the adjoining coal mine I believe that the problem of having to build a coal loader to fill the trains or trucks will be alleviated by using one loader for the two mines. Seems logical to me.

I believe this announcement is a company maker in that it also means immediate cash flow which any new mining venture needs urgently.

The due diligence being undertake by Eastern is necessary to determine the tonnage of coal available from the aquired mine and obviously to get government approval for a foreign take over.

With this mine in NZ and the new mine at Hail Creek in the Bowen Basin adjoining Rio s existing mine expect coal to be being loaded within two years. The tonnages already known and announced are staggering. Two hundred million tonnes of coal is hard to comprehend and it will take many years to exhaust that volume. It is interesting to ponder the value of the coal still in the ground in situ at about $200 a tonne when shipped. Maybe $4 a ton in the ground.

BTW they are safe from an unfriendly takeover by RIO of the Hail Creek operation because the directors and friendly investors, myself included control about 55% of the shares.

As far as the coal seam methane gas field goes, this has been put on hold until the cash is flowing from the coal mining operation. Once again seems logical.

Cheers

Tech.