phillipcapital research

COMPANY Carabella Res Ltd| CLR | $0.35/share Date: 30th January 2013

RECOMMENDATION Buy | Very High Risk | $1.00/share target (Previously –Buy| $0.99/share target)

EVENT DecQ’12 report | Grosvenor West going north while Bluff advances

KEY POINTS

Bluff PCI coal project boosted by coal quality tests
• Mine planning commenced to fast track development and approvals of Bluff PCI coal project in Qld’s Bowen
Basin near existing rail infrastructure. CLR is also acquiring an adjoining permit to simplify open-pit design.
• Coal quality tests have boosted development credentials. CLR suggest production is possible within 18 months.
• We model production starting in over 21 months and heavily risk this project to 40% confidence level worth
$0.17/share, though un-risked we estimate it is worth $0.40/share. De-risking these development steps could
be evident within the next 3 to 6 months for production

Grosvenor West – port access and funding – progress but a fair distance to travel yet
• The large Grosvenor West coking coal project, near BHP’s flagship Goonyella mine, saw progress on reserves
definition, project design and approvals processes.
• CLR state the possibility of accessing Abbot Point’s existing the north port’s capacity and is progressing funding
options including a partial asset sale and off-take agreements. Hard coking coal customers are rapidly realising
that predicted growth in new supply such as Mozambique will be much slower in delivering required growth.
• We acknowledge progress by raising our project confidence level from 40% to 45%. Break throughs on these
fronts would see the market materially re-rate CLR closer to our $1.00/share target.

Cash position and potential new shareholder
• December 2012 closing cash position was $15.44m - $04m ahead of our estimate, with $3.22m expected to be
spent in the MarQ’13. Cash holdings are sufficient for modest delineation activities until early 2014, though the
CLR will be seeking access to capital to accelerate development processes at Bluff and Grosvenor West.
• We see the potential for CLR to acquire the sub-block adjoining Bluff from Mr Christopher Wallin wholly for scrip
(theoretically up to 13.3% of CLR) as positive. It is an endorsement for the Bluff and CLR’s flagship Grosvenor
West coking coal projects and for his capacity to be a backer of these initiatives.

Maintain Buy, price target rises $0.01/share to $1.00/share