ikwezi mining on the road to coal production, page-14

Many thanks for all that. It is absolutely vital to be clear whether the company has enough funds to get to positive cash flow without a dilutive share issue. The Newcastle project is already several years late, so they will have had unbudgeted for additional running costs, which increases the risk of a dilutive share issue.

I appreciate what you say about some differences between Australia and South Africa in bringing coal projects to production, but one difference you have not mentioned is the tax role Eskom plays in sucking off the benefit of any super normal profits that accrue as a result of coal price rises that would give, say, a return on capital employed greater than say 15%. It seems to me Eskom shoves these disgusting coal supply agreements on to wannabe-junior coal producers (I wonder if it is a condition of getting the mining license that they have to sign up to these disgusting CSAs) that allow Eskom to get their coal at $23 a tonne when the world price is nearly four times that. Eskom is behaving as envious left wing tax collector taking all the profits for itself. The real money spinners are the export coal sales, but Eskom and Vitol (I haven't investigated Vitol but they seem to be a bit like Eskom) just want to take all your coal and make you struggle like hell to get those much more important export sales. Then there is the small matter of the x hundred km journey to port. If I was a corrupt ANC official, I'd bribe some nutcase to blow up the railway every time the world price of coal rose to stop super normal profits leaking to private shareholders and force the company to flog more coal to Eskom at those despicable local prices. And of course the Govt. can simply put a ban on coal exports any time it feels like it (coal is a strategic mineral in S.A.?). Strikes, flooding and aging infrastructure when you have got debt to repay of course all make everything scarier. I am reading through the prospectus but it is hard to get as excited about a possible re-rate on a change from explorer/developer to producer especially when there is no upside (or hardly any) from coal price rises. Just my thoughts.

P.S. I do see needing only a fifth of capex to do the same thing in S.A. does make a difference but giving up all that coal price upside to Eskom/Vitol seems criminal.