rey - the coal basics

Duchess Paradise Coal (DPC) will sell at about 11% below benchmark thermal coal out of Newcastle. Present price is about US$140 per tonne ( DPC US$124.60 ). Though the Big Wet factor is only temporary and by 2013 can be expected to fall back.

Each Highwall mining machine (1 mtpa) will cost US$14 million and payback is estimated at 2.5 years at US$0.90 to A$1 (the period varies by exchange rate ie 2 years at US$0.80 and 3 years at US$1.00, to A$1.)

REY expects to mine 2.5mtpa ROM and sell 2mtpa of thermal coal.

REY will transport coal by road (180 kilometres) to the Port of Derby.

2009/10 cost estimate is at $60 per tonne.

I remain bullish in the longer term for REY from 2014 and on profits after costs are paid off, by 2016. Due to the time factor I consider the stock a hold.