gmp reiterates buy ., page-3

Funding secured for Penumbra project
Secures US$25m secured project loan facility

This morning Continental Coal reported that it had secured a 4 year, US$25m
secured project loan facility to help it finance development of the Penumbra
underground project. The facility is repayable on a quarterly basis following first
production and includes facilities to hedge USD/ZAR exposure and the risk of a
substantial correction in thermal coal prices. The company does not expect to
draw down the facility until CQ3/11
Penumbra development to commence in June; first production in 2012


Management expects to start construction at the project in June and believes
that first production is possible in early-2012 with full production in Q3/12. This
is in line with our expectations. Export thermal coal will be transported to
Richards Bay Coal Terminal and sold to EDF Trading per the company?s
existing offtake agreement.


No change to our model, but positive
We are not making any changes to our model until the company starts to draw down
on the loan, but we regard this development as positive as it means that the
company should not have to come to the market at the present time for what we
would regard as being a dilutive equity raising at the current price.

Highly leveraged to rising thermal coal prices

As we have noted in recent research we expect continued power shortages in
China to translate into higher thermal coal imports over the summer, and
potentially higher seaborne trade thermal coal prices. With Continental Coal
highly leveraged to the spot market, we believe this is a positive and highlight
that following recent weakness, the stock looks highly attractive, in our view.

Valuation unchanged; re-iterate Buy rating on significant upside
We value Continental Coal using a sum of the parts valuation based on DCFs
for the company?s existing operations and the Penumbra project and
EV/resource multiples for the company?s early stage projects. Our NAV is
unchanged at A?10.1. We maintain our price target at A?10 and re-iterate our
Buy rating as we believe the stock looks undervalued after recent weakness.