price target 20c, page-29

While eskom does pressure companies in SA I dont see any issue with this deal.

Eskom isnt taking the 6000kCAL (export quality) coal. The 100k PA of this quality coal produced from the mine will be shipped internationally.

Eskom's deal is for the low quality coal, this stuff couldnt be shipped as most seaborne coal is much higher quality with lower moisture content, making it better quality and more stable to transport.

While there are always many many unknowns with any loss making company, the fact is Eskom have had many coal shortages and to my understanding are starting to negotiate fairer deals to maintain a commercial supply of low CV coal to their power plants.

Back in 2010 from my understanding locked in contracts could produce as low as 4 USD per tonne profit, whereas this contract has a 7USD (approx) profit per tonne.

Again it gets more complicated as I believe this is the OPEX vs sale price, it doesnt include depriciation/corporate costs. Once you add in those costs/ the risk of completion etc. it all comes down to what risk you are willing to take on.

With a company like this, if the risk was removed andit was already making 15 million free cash flow a year (after servicing debt) it wouldnt be a 20 million dollar company.