psi,I don't believe the construction of the SBR is in any doubt....

psi,

I don't believe the construction of the SBR is in any doubt. It's the timimg which is in doubt due primarily to Xstrata's decision whether to commence construction of their Wandoan mine in the immediate future.

So basically at current low coal company valuations and a low coal price, investors in companies such as COK, SMR and MTE who are dependant upon the SBR for their growth plans can decide whether or not they want to purchase effectively a call option on coal price/demand recovery and a constructed SBR with no expiry date OR NOT. Thus far it's seems NOT! Of course I am assuming there will be a coal price/demand recovery and the anticipated construction of Xstrata's Wandoan mine and SBR sometime into the future.

On QLD royalties - The QLD government contrary to industry and media spin have delivered Xstrata a fantastic deal with a slight increase in coal royalties once the thermal coal price goes above $100 per tonne, but also guaranteeing them a 10 year royalty freeze. This definitely assists Xstrata for the longer term as it provides increased certainty to their costs.

When you do the sums, the QLD royalty increase is really immaterial on a "real" coal operation. I would be happy to be challenged by anyone on this.

In the meantime COK needs to only get through this soft patch and ensure it can continue as a going concern. The quarterly Appendix 5B's suggest that their coal operation at Baralaba will enable it to.

By the way, I forgot to mention the $AUD when KEPCO purchased Bylong.

There has been lots of speculation this year from the media and analysts that the high $AUD will not promote foreign investment into our coal sector here in Australia, natural gas price low blah blah blah.

I tend to disagree with these views but clearly I am wrong as coal stocks have been going down from 4th quarter 2011 with seemingly no end in sight.

At the time of the KEPCO/Anglo American coal deal for Bylong the AUD was at around 90 cents however by the time they settled the transaction the AUD was at parity.

Nevertheless, interest rate cuts over the next six months or so by the RBA should ensure that the $AUD stabilises or depreciates rather than appreciating. This in my opinion will bring foreign investment back to Australia.

There was also the Centennial Coal takeover by Banpu that occurred around the same time.

At a time when coal prices are low does everyone believe that any suitors or prospective JV partners will wait for the coal price to go up or $AUD to go down before showing any interest in any junior coal companies?

The naysayers will say they will wait for the coal prices to fall further because China and the rest of Asia's economies will continue to deteriorate and some have even concluded that it's the end of coal. Yeah yeah. The trigger will be pulled sooner or later just don't know when. Could be another year or two away.

In my opinion, the big coal/diversified/power utility companies, domestic and foreign may soon have an opportunity to grow their own resource base for the future by taking their pick of all the junior coal developers/producers at far less than they could ever have imagined one year ago. Production to them right now is no priority but cheap asset purchases should be.

Many coal developers are trading or capped at less than their exploration expenditure or Net Assets. It's widely known that successful exploration adds value to property, in many cases up to 3 times the value. Look at COK for instance - Mkt cap $125m and has net assets (inc exploration expenditure) of $284m.

That's the minimum value ($284m) I place on COK for any suitors. KEPCO paid how much for an undeveloped 420Mt resource? Was it $403 million?

Go COK.