old park lane research report update, page-4

Continental Coal reported a strong set of production results from its export dominated Ferreira mine and Delta Processing plant. The results reinforce our view that Continental is successfully rejuvenating the Ferreira mine with increased production and sales coinciding with a period of strong coal prices.

? Export coal sales for January and February were 40,448 tonnes and 48,532 tonnes, exceeding December?s sales by 25% and 50% respectively. The company expects production to remain on track during March and is targeting total export production of 141,000 tonnes for the quarter, in line with our estimates. Future budgeted export sales guidance remains unchanged at 120,000 tonnes per quarter. The increased production validates the company?s earlier decision to appoint a new mining contractor.

?Continental Coal has survived the last two months relatively unscathed by heavy rains, national strikes and a number of train derailments on the Richard?s Bay coal line that have affected other producers.

?The company?s share price has somewhat languished since its 8.8 ? peak in late January, with the stock trading in the 6.0 ? to 7.0 ? range in recent days. We argue that the stock has simply followed other coal equities and the coal price in recent weeks. Excluding any further near term volatility in coal prices, we expect Continental Coal?s shares to return to trading based on fundamental factors. We expect the stock to regain traction as the company proceeds with its aggressive growth plan. See inside for key catalysts.

?We remain bullish on thermal coal. As a result of the potential growth in Asian demand, infrastructure bottlenecks and the potential for more supply-side shocks, we believe that thermal coal prices remain well supported above $100/tonne. It is our view that the long term outlook for global energy demand and coal consumption presents a compelling investment case.

We reiterate our price target of A$0.13 per fully diluted share. Given the recent share price weakness, we believe the shares now represent a cheap entry point into a quality coal play. With strong leverage to thermal coal prices and a quality pipeline of predominantly export projects, we expect a significant re- rating of the stock as Continental ramps up production.

www.conticoal.com.au