mining maven review of conti, page-9

Thanks dtr & psi. Like I said not quite warts & all but it does expose a number of assumptions and leaves them open to debate.

I like that the report focuses on the current business as it stands, without veering off to coking coal opportunities etc. Much of it is familiar but it’s quite well articulated in some places and balanced.

It clearly outlines that the cash situation is tight (although with relief to come via SIOC-cdt, ABSA and dare I say it vanmag).

The comment about the Mashala Holding (now 83%) impacting on the cash back to CCC was also worthy of note.

It’s interesting that a condition of ABSA drawdown was a minimum 75% holding in Mashala. Given this was achieved in December it sort of makes you wonder what the remaining conditions precedents are/were.

The 7m ROM in 2013 includes a full year of production from De Wittekrans which is as they say ‘ambitious’. It also hints at the possibility of further dilution to get De Wittekrans up and going if the existing mines and Penumbra don’t have sufficient cashflow.

You can clearly see Hairy’s and other’s (including me in the past) concerns about ‘cash burn’ when you take a step back and consider $220m of new share capital has been raised since 2008, the $100m debt funding and the $16m Convertible Notes in order to get the company up and going, as those figures don’t yet include funding for De Witterkans.

None of the above should shock as we are now all aware of the realities.

The recent board additions, settling SIOC-cdt, 100% ownership of Mashala, increased cashflows and bringing Penumbra online on time and budget should go along way to easing some of my short term concerns.

It will be interesting to see how things unfold with De Witterkans throughout 2012.

I firmly believe it’s going to be a hard slog for a number of years yet, but I'd rather know that, than not know that.