minesite article - plenty of opportunity!

Great article summarising Nowa Ruda acquisition.

http://minesite.com/news/balamara-resources-sees-plenty-of-opportunity-to-meet-europes-growing-energy-demands-by-mining-lignite-in-poland

August 01, 2013
Balamara Resources Sees Plenty Of Opportunity To Meet Europe’s Growing Energy Demands By Mining Lignite In Poland
By Our Man in Oz
You might imagine that the toughest assignment in the world of mining today would be to develop a coal mine in Europe, given that coal prices have crashed and Europe is promoting its emerald-green credentials as a place which doesn’t like coal.

Looks can be deceiving though, as a small Australian-based explorer is confident that it can prove at a coal project recently secured in south-west Poland.

Balamara Resources has received reasonable recognition in its home country for its Polish adventure.

Its share price has risen by an eye-catching 41 per cent since the awarding of two concessions by the government of Poland in the Nowa Ruda area close to where the country’s border bumps into Germany and the Czech Republic.

But the shares could do much better as news of the deal reaches bigger markets such as London, with its more refined understanding of Poland, in a historic context, and through the number of Polish plumbers and bricklayers to be found in the city’s pubs.

Before the detail of what Balamara is proposing to do at Nowa Ruda (which means “New Ore” according to Google Translate), a quick examination of Europe’s energy mess is worthwhile.

The nub of the issue is that the entire region is pricing itself out of world markets as its environmental policies force up the price of electricity at a time when major competitors such as the U.S. are enjoying the economic benefits of cheaper energy.

What’s happening in Europe is a coal explorer’s dream because the closure of nuclear power plants and a rush into wind and solar alternatives is ensuring a long-term deficiency of the base-load power needed by industry. A solar panel of a roof is fine for a household but of little use on a steel mill.

And botched energy policies have restored coal as the “go to” power source in large parts of Europe for another interesting reason - coal has become the low-cost leader, able to undercut other power sources by a substantial margin.

In Poland, the picture gets worse. The country’s failure to find the shale gas its government had been dreaming of has forced a return to reliance on the most polluting of all fuels, brown coal (lignite).

Enter a few enterprising Aussie explorers who have found that their home country has become too tricky (and costly) for coal production, whereas Poland has rolled out the welcome mat.

In Balamara’s case the company applied for the Waclaw and Piast concessions knowing that they had a long record of producing metallurgical coal, anthracite and high-quality thermal coal, and that the metallurgical coal can find a ready market at three nearby coke-making plants.

Last coal was railed out of Nowa Ruda in 1995, a time which corresponded with a sharp fall in energy prices and the big clean-up of industries which had grown grossly inefficient after four decades of communist incompetence.

Closing Nowa Ruda meant that the local coke plants have had to import the material they needed, with some of their supplies coming from as far afield as the US, a country which has now become a big coal exporter as the shale-gas revolution pushes coal out of its home market.

Balamara’s plan, which is still in its infancy, is to take a look at the Nowa Ruda data base, then move up a notch to a drilling programme to confirm the accuracy (or otherwise) of the communist era drilling.

It will then use the combined information compile a resource statement that complies with the Australian JORC-code, and move on to undertake a full-scale feasibility study.

The plan has already attracted at least one fat cat Singaporean investor who has quietly acquired a 19.9 per cent stake in Balamara and expressed an interest in going to 35 per cent of the stock.

Balamara has, in turn, revealed a proposal to split its newly-acquired Polish coal interests from other assets, including a phosphate prospect in the small west-African country of Togo, though that seems to be more of a thought bubble at this stage and would probably only occur when there’s more detail available about the coal assets.

Interestingly though, the first step in the possible split has already been flagged up after Balamara inserted its coal interests into a newly-formed Polish-based subsidiary, Coal Holdings Sp.

More work is required before Balamara will be confident that it can go coal mining in Poland, but the early indications are that local workers who took redundancy payments when the mines closed in 1995 are keen to make a return now that most of them have burned their way through the small cash hand-outs they received.

Unknowns at this early stage of the Nowa Ruda project include the likely size of a redevelopment, the capital cost required to restore operations and the likely cost of production.

Earlybird answers to those three questions are that a redeveloped mine will be bigger than the one million tonnes a year previously produced, that the capital cost will be somewhere between US$80 million and US$100 million, and that metallurgical coal will be produced for less than US$100 a tonne, which is an encouraging estimate as metallurgical coal currently fetches around US$150 a tonne.

In a region with a population of around 25,000 local workers are keen to return to the mine, the government is keen to cut the unemployment rate. Given that, Poland’s long history of coal production, and a need to find additional sources of energy for metal works and power generation, there is every chance that Balamara could be mining at Nowa Ruda in the next few years.

What the company ought to now consider is widening its investor base by taking the time to send one of its executives across to London, making a Minesite forum a first point of call.