It is a fair point iShMAEL, the chief difference is now the coal price. Looking at adjacent projects, it is likely that the cost of production for this asset is around US$60pt. By most forecasts, coal is likely to trade from around $80pt, where it is now, towards $100pt over the next couple of years during which the project will be developed. Coalspur has recruited Gene Wusaty as it's MD, the ex President of Coal mining for Ivenhoe, who has developed some very large projects. He wouldn't have got involved unless he felt this project was a good one. Gaining the crown property tenements this week is very meaningful, as it provides extra economies of scale.
Over the next month or so the company will add JORC compliant reserves from Coalspur to the Hinton figures and produce a scoping study for Hinton. It is at this point that the market can get a sense of project's commercial viability. From there it can move to pre-feasibility and start to attract off-take partners. A that point it will be in a position to attract development capital and will move on from being some "land and a man" to paraphrase you. The project has already attracted enough capital to see it through to this stage.
Investors at this point have to assess whether they believe the project is viable. The answers, to some degree, will come from the scoping study, their view of the coal price over the next few years, and therefore whether they believe the project will attract development capital. If so, the returns on the share price will be a large multiple. Personally, I believe Mr Wusaty knows what he is doing. It will probably take a good six months for all this to unfold. Coalspur is very much a buy and keep kind of stock.
I think punters would do themselves a favour by taking the stock off their daily price watch lists, it is just not that kind of play.
CPL Price at posting:
31.5¢ Sentiment: Buy Disclosure: Held
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