I think the end game is near for CCC. Everyone should obviously...

I think the end game is near for CCC. Everyone should obviously do their own calculations and I would be very interested in feedback but this is how I see it.

IMMEDIATE LIQUIDITY

Firstly available cash must be low, hence need to issue and apparent failure to repay the RR loan:

Cash $14m
Less $6 committed to Penn
less $2m Restricted Cash *
Less

Available cash $6m

* from annual report, restricted cash was $4.8m. It appears that has dropped to $2m but I'm not sure.

So there was at most $6m cash available at June, apparently required for working capital, and the group is cash burning. They still owe I think $8m on Mashalla by the end of September. From memory, Mashalla vendors have the option of accepting stock but if they did, they would probably control CCC at the rate shares are dropping.

So on the face of it CCC will run out of cash by the end of September. In theory, and leaving aside the Penn development facility that is now $30m, there should still be $74m of debt facilities available. That is the $9m convert, $35m ABSA and $30m EDF. Unfortunately, although the market hasn't been informed, we have to assume they have all disappeared and facility availability is zero.

LIQUIDITY OVER THE NEXT 15 MTHS

IF they somehow manage through this immediate liquidity crunch, perhaps through issuing $10m equity, they face bigger problems down the track.

Firstly they will require $5-$10m cash for working capital to ramp up Penn. I understood that was to be funded by ABSA facilities but they have not been mentioned recently. Then they have the $16m convertible maturity which I think is in October next year. It was to mature three years from drawdown. That has to be met in cash I believe and it will obviously become a headline issue well before maturity.

Whether they can raise another $21m to $26m to refinance the convert and fund ramp up of Mashalla depends on your view of net asset value. That leads to the question of solvency.

INSOLVENT?

Net debt currently is about $13m ($16m convert, $9m EDF loans, $2m RR loan and $14m Cash).

Net Debt $13m
Add
Completion of Penn $30m
Penn Overuns $4m

Net Debt on Completion $47m

So net debt Pro forma for Penn Completion is $47m. That excludes cash burn at current coal prices. And to that you need to add the liability to Mashalla vendors of $8m. That gives pro forma liabilities of $55m.

Are assets greater than $55m? This is where it becomes very subjective obviously and asset values fluctuate with current and expected coal prices and equity markets. But in my view, they aren't solvent just now. Its not a good time for solvency of a coal company to be tested:

My snap valuations:

- Vlak Vark (CCL owns 60% so CCC shareholders 44% shareholders) My value CCL share is $5M

- Ferriera - Cash neutral at best right now, 18mths max life, $5m ish rehabilitation cost. My value neg $5m

- Penn - 3x bottom end of range cash flow $15m value $45m

- Dewitt - zero value with $200m ish capital cost given where listed assets are trading

- Vlakplaats, $19.5m based on what Kores paid after their legendary due dil but that was top of the market and I'm using $8m.

- Botswanna - I don't understand Bots well but I'd be guessing close to zero. Who wants to spend $5m a year drilling that at the moment when the country itself doesn't have the required infrastructure.

So that gives asset value of $53m and net assets negative 2m. None of that accounts for forced sale valuations if they run out of cash.

I haven't included Vanmag just because I'm so confused about where its at and who owns it.

COMPLICATIONS

The group structure complicates any analysis. We don't know what's at the parent level as we only get consolidated accounts. I think that the convert is probably at the parent company level without guarantees from CCL. That would make CCL more solvent but reduces the net equity at the CCC Australia level. It also makes refinancing the convert very difficult, particularly given where the market cap is now and where I expect it to be in coming months. It seems quite possible to me that the convert holders will effectively end up owning CCC.

That the convert is a holdco instrument may make CCL look better to lenders than the picture I'm painting but obviously doesn't stop the parent running out of cash and triggering some event.

WHAT WILL HAPPEN NEXT?

Three points here:

1. Can they issue the stock and raise $10m? If they can't, then I think there could easily be a prolonged trading halt as CCC goes into crisis talks with the BEE, Mashalla Vendors, the convert holders, EDF and other interested parties. Okap fans will be used to these halts at least.

2. Can they draw the ABSA facility to develop Penumbra? This is the vital question for the AGM I believe. Are ABSA really committed as CCC have repeatedly said, I'm not sure. The feeling from the last updates seemed to be that they cut the project tranche back from $35m to $30m and required some contingency to be escrowed and then ABSA would allow drawing. Not sure though. If there has been some drawings in the last few weeks then great. Otherwise, its my guess that drawing under the facility is also contingent on more capital being raised.

3. If they can raise the $10m and draw down Penn and complete under the new plan, they still need to raise more money for Penn working capital and to refi the convertible.

No wonder JB seems to be focusing on Kab at the moment.