does the $30 million (fully diluted) MC of MNM at 10.5c make it good buying?
the $75 million (fully diluted) MC of a rival brown coal player is the obvious point of comparison.
MNM have a fully diluted (ie, including ops) share count of 292 million. ESI, fully diluted, are carrying potentially 3 billion shares.
ESI has no coal. MNM has 2.5 billion tonnes of brown coal perfect for export from Geelong.
It also has 569 SQ KM of tenements in the LV - probably holding another 3 billion tonnes of coal.
Under MNM's pre-JVA with exergen, if exergen use their tech on MNM's Vic brown coal reserves MNM get 50% of the revenue. That's the huge revenue upside MNM offers because it owns a mountain of brown coal.
But do exergen need MNM if they get an LV coal allocation from the S7 zone, as looks very likely based on recent statements from the Victorian Government?
Yes they do. Exergen are reliant on MNM because they have entered an off take deal with TATA for 8 million tonnes of BCE per annum starting in 2015. The only way they can deliver this is from the port of Geelong. There is no way to export coal from the LV, and won't be for perhaps 10 years.
The only brown coal reserve in Victoria that can make that Tata/exergen off take deal happen is MNM's BM project.
So if exergen want to keep Tata onside then they have to keep MNM on side as well. There are 2 ways to do that. They either JV to lock up the BM coal. Or they take MNM out by a merger or takeover.
But even without the exergen link MNM still controls a huge amount of brown coal. On that view it doesn't matter which upgrade tech prevails. Without brown coal they are all worthless.
It also means that MNM has inherent worth regardless of the tech landscape. It is now a genuine takeover target for both its BM and LV coal resource.
A sale of its brown coal reserves at 10 bagger multiples of its MC is also possible in the changed environment for brown coal in Victoria.
In the new era announced by Ted Baillieu last month brown coal is set to become for Victoria what iron ore is for Western Australia in Government revenue terms.
10c per in ground tonne of MNM's coal is not unrealistic going forward on this scenario.
BM 2.5 billion tonnes @ 10c = $250 million
LV 3 billion tonnes @ 10c = $300 million.
And MNM has a $30 million MC?
The Tata/Itochu/Sedgman/Thiess/Elphinstone backed exergen are clearly the ONLY brown coal upgrade group now active in Victoria with sufficient funds to offer what Baillieu says is a pre-condition of Government brown coal largesse - a credible capacity to provide the infrastructure needed to unlock the LV for brown coal exports.
On any bona fide analysis MNM is the obvious next brown coal SP bolter on the asx.
And the only way to invest in the looming exergen era of brown coal exploitation in Victoria.
DYOR
MNM Price at posting:
10.4¢ Sentiment: Buy Disclosure: Held
