eddie...a query for you, page-2

Hi Carlo,
I'll do my best but I'm not intimate with all the background costs/wages and their breakdown. I think perhaps you are assuming that the ratio of costs to revenue in the June quarterly can be extrapolated forward. Fact is that they had much of their ongoing costs there but very little of the ongoing revenue.
Most of the June qtr for BNT involved preparation work on site (they do have a lot of senior managers/engineers/workers on site etc.......) , buying and refurbing equipment in their workshops, director/staff salaries perhaps, paying various people for the work done in tying up the deal in late March etc............. lots of costs and little revenue.
The only real revenue they had was for some preparation work at the QLD job (they never mention who it's with other than "a major international company"........my feeling is it's with AngloCoal , a subsidiary of Anglo american plc ) and a couple of weeks on the job with Centennial. So no real mining revenue (based on coal production) or leasing revenue from their mining equipment.
By my reckoning a few of the costs in the June qtr were one offs and others were fixed costs going forward . As the CEY and Anglo (let's assume I'm right) contracts come on line then these costs from the June qtr will continue but will not be important if revenue targets for 2006 (40m+) and 2007 (80m+) are met. Typical margins on their coal mining contracts are 15-25% .........I believe contract-specific labour costs on each contract form about 50% of costs.

I am currently following up on a few queries I have on the relative contributions of the various divisions to profit and will report back if I pick up anything relevant .

In summary - I don't think the June qtr cashflow figures are very relevant at all. Assuming they tie up the QLD contract as anticipated then I don't believe cashflow will be a problem at all. I've researched this well but there does come a point where you have to rely on what the directors are telling you. We'll soon know that ,but there's nothing suspicious in the June figures as far as I'm concerned.

The September qtr figures (even then we have setup costs involved at QLD job) and moreso the December figures will really tell the story.

The BNT story does have an element of "too good to be true " to it , but until I see evidence to the contrary I'm going to give them the benefit of the doubt. If they get anywhere near their profit and growth targets then even at today's prices they're a steal. Not only that , but unlike many companies of their ilk they have much of their shareprice backed by hard assets. I'm cautiously very optimistic and very much hope they're not full of it LOL.

Cheers,

Ed.