Shaw Stockbroking ReportThe announcement for the offtake of domestic coal is a significant step towards project financing. The strategic partnership with Noble has proven to be highly fruitful thus far for RES as it has provided RES with a US$123 million loan facility, an export coal contract over Stage 1 and Stage 2 production of over 60Mt and this domestic coal offtake contract from Stage 1 of the project totalling 24Mt of middlings product. RES has now achieved all major hurdles in obtaining project finance including its haulage contract with TFR, coal offtake contracts and all required licences and permits for production. We believe RES now has a strong base from which to continue discussions with previous and new banks and equipment providers. We continue to take a conservative stance on equity participation and coal prices and maintain our price target of 0.50/share and BUY recommendation. We only value Stage 1 in our estimates. Inclusion of Stage 2 has the potential to increase our valuation to $1.39/share.
Perhaps debt funding will come first? In PJ we trust!
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Anthony Noble, MD & CEO
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