by: Tim Boreham From: The Australian March 23, 2013 12:00AM
Source: The Australian
WHEN a stock slinks below 1c it usually becomes a shell company for another endeavour or, in the words of The Who, simply f-fades away. But what if there's a valuable asset sitting under the board's nose? That's the contention of coal-a-phile Rob Neill, who last August took over as chief executive at Cougar Energy (CXY), replacing Len Walker.
Walker, chairman Malcolm McAully and one other director resigned from the board this month, with the chairmanship filled by Andrew Matheson, who has had stints at BHP and with the late coal king Ken Talbot.
The underground coal gasification (UCG) play met its Waterloo in peanut country when the former Queensland government banned Cougar's Kingaroy UCG project on environmental grounds. Cougar has launched a legal challenge, but broader UCG sentiment has evaporated.
Given his coal pedigree, Neill took a closer look at Cougar's peripheral coal assets: Wondoan, a thermal deposit in the Surat Basin with a JORC-rated resource of 360 million tonnes; and a 21km PCI coal tenement, Mackenzie, in the Bowen Basin.
PCI (pulverised coal injection) coal is valued as a lower-cost alternative to coking coal.
Mackenzie lies between two existing PCI mines: Jellinbah (privately owned) and Yancoal's Yarrabee. "I went to the board and said inside Cougar you might have a coal company," he said. The assets were duly announced for sale, but there were no takers at the right price. Since, the tenements have been packaged up as Kandoman (as in "can do, man") Resources, the bedrock for a "truly diversified global energy company". Yep, small-cap land is a modesty-free zone.
Neill said several parties had asked about buying a portion of the project. But Cougar last month raised $1.04 million at half a cent each. Cougar's next step is a $400,000 drilling program at Mackenzie to firm it up a JORC-compliant deposit.
Cougar still dabbles in UCG, but Neill believes the sector is far from proving itself commercial.
Neill, by the way, believes too many juniors have used the GFC and receding coal prices as an excuse for their malaise, when in reality promoters burnt Chinese and Indian investors by dumping their stock and running. They know who they are.
He also warns that proponents can end up merely "babysitting" projects for Asian backers in return for substantive funding.
Unlike those other cougars of a sexual predatory variety, with an $8m market cap this Cougar will either improve with age or, as Pete Townshend and Co crooned, die well before we get old.
CXY Price at posting:
0.4¢ Sentiment: Hold Disclosure: Held
