post from mihal

Hi guys, Mihal asked me to post this for him

As you would expect he went to the meeting so this is his first hand account




Many people on HotCCCopper & elsewhere keep throwing up incorrect MC figures, so here it is, with some notes:

Current undiluted MC = 3.8c x 3.1B shares = $118m
Options listed & unlisted = 930m (120m expire October 2011 at 15c/20c - unlikely to be exercised) for all strike prices/dates: see page 9 of "Notice of GM" http://www.conticoal.com/fileadmin/c...t_02.06.11.pdf

ABSA Project Funding announced - $35m for Penumbra
Existing EDF loan payed back via ABSA ($15m - minus amt already paid back in Ferr. coal)
Working capital facility ABSA = $15m
VanMag proceeds = $10m
Cash at hand = $5m (this is just a guess!)

post BEE settlement August:
Cash from BEE2 = $20m
Debt to CCC from BEE2 = $10m

Annual Free Cashflow (not including BEE2 26% share, post settlement August)

approx 500ktpa * $40 on current margins @ Ferreira = $20m x 64% = $12.8m

1.2mtpa * $7pt on current margins @ VlkVk = $8.4m (100% to CCC as BEE partner not yet earning in)

= free cash p.a. approx $21m (not including Ferr. domestic coal). Ferr mine life = approx 2 years

At the GM yesterday it was reported that CCC have just achieved record quarterly export railings to RBCT & record quarterly production at both operating mines. So cashflows should be increasing.

Resources statement here: http://conticoalers.com/2011/06/15/c...s-jorc-update/

Total SA Resources @ 565mt. Next project Penumbra: resources just announced increase of almost 300%

This from recent Madison Williams report on CCC:

Recent M&A transaction confirm implied valuation. Recent M&A transactions highlight the value of Continental?s asset base. On May 4, 2011 Optimum Coal announced a deal to pay ZAR 420 ($US60m) million in cash for Umcebo Mining?s two prospecting rights containing an in-situ coal resource of about 120 Mt of thermal coal. At the implied resource value of US$0.52/t, we calculate a resource-based per share value of CCC shares at A$0.08. As Continental unlocks the value of its extensive resource base and ramps up EBITDA, we would expect the share price to more clearly reflect the underlying value of the company?s assets.

+ potential 2.7Bt shallow resource coal at Botswana*** - drilling to start next month

+ Kenya*** (possible 300mt resource for an outlay of approx $3m - CCC execs confident of being granted rights to one of the 4 coal blocks on offer)

+ potential JV with Eskom on a new project (Eskom to fund all development costs) with Eskom to pay CCC on a cost + basis for domestic coal - as announced at GM yesterday

*** these are/will be held alone by CCC, and BEE partners have no rights over these assets/potential assets

Some more notes from yesterday's GM at UWA (where all 8 formal resolutions were passed by shareholders, including 10:1 consolidation & approval of BEE transaction):

- Late July AIM listing - no share issue on listing
- Increased export railings over last quarter, despite the RB line being closed for maintenance for 20 days
- Only 3% of CCC's total resources being utilized at current operating projects
- Will be releasing quarterly cash flow reports in future
- Op costs for next 2 projects ~ $65pt USD FOB (including the recent 30% increase in rail costs)
- EDF loan (~$14m being paid back via ABSA loan - some already paid back in coal) - still available for CCC to use for future projects, if necessary. ABSA loan has no attaching options/equity etc (non-dilutionary) - gives 3rd party validation
- Eskom looking for broader LT relationships/partnerships in SA - where Eskom will JV & fund all capital costs, if they can secure LT supplies, on a cost + basis. Essential for "social license" & access to rail/port allocations. Looking at developing a new domestic mine with Eskom JV (not on current portfolio).
- Have all necessary permits to start Penumbra, have contractors on site already. Expect to start very soon.
- 95% of BFS at DeWitt finished, including wash plant study. Over July the BFS results will be released.
- Botswana is a strategic asset - will be a while before it's commercially developed owing to lack of infrastructure.
- JB very enthusiastic about Kenya was there two weeks ago, met with almost all govt ministers - confident CCC will get one of the coal blocks, and have good relations with Kenyan govt.
- Rail/Port allocations: still waiting for increased Quattro allocations (they were due 1/4/2011 - a lot of politicking involved). All export coal produced in SA is being sent out (not stockpiled) - just a matter of how it gets out, via own allocations or by using another party's. Opportunities to use Mozambique ports (will be done for Vlakplaats). CCC very confident that rail/port allocations will be available, esp. given its strategic alliance with Eskom to make sure at least 50% of CCC's coal is for domestic market. New BEE partner will raise the company's credibility & increase ease of access to infrastructure. Transnet are spending a lot of $$ to make sure RBCT can raise capacity to 80mt in next 2 years.
- Nationalization issue discussed: SA is an inherently difficult place to do business. CCC has good relations with ANC. Malema has the support of a large proportion of black population who have missed out on the promised benefits of BEE legislation, which has only benefitted a very small elite of blacks. PL says SA mine nationalization will not happen - not workable. Oil & gas is much easier to nationalize, ala Venezuela. Nationalization issue is a mainly means to achieve political goals. But as long as this is a live issue, SA will struggle to attract o/s investment capital. Coal is one of the most secure sectors, given its strategic importance to SA's energy security & value to national growth prospects. There has been a sea change in last few weeks, with many leading figures arguing strongly against nationalization.
- James Leahy's appointment is a big coup for CCC - he has a brilliant reputation in UK & Europe. Was been approached by 30 different resource companies to join their boards, after leaving Mirabaud - Conti was his first choice. James decided to take options rather than a big salary package as he can see the LT value in CCC.
- New BEE (BEE2) group have a massive balance sheet. Received a dividend from parent company of ~$US60m last year. One of the few Community Development Trust Broad Based Black Economic Empowerment (BBBEE) groups that serves the true role of the BEE legislation to benefit local/community groups. BEE2 will fund their 26% share of development costs. BEE2 requested their name not be released until deal with CCC is completed.

- PL & JB both reinforced the message that world class companies like EDF, KORES, ABSA/Barclays & BEE2 have all done enormous, and painstaking DD on CCC, and analysed CCC inside out. You don't get these groups signing deals with CCC if it's a dud!