BRL (ASX) Think like Warren Buffett

Originally posted by Irishmist ↑

Originally posted by ExpatSingapore
The message that follows is old news - dating back 4 to 8 years. Nothing below about current events. Readers looking for current or future insights may wish to ignore this post.

Replay, your question was: A question Expat, just because I'm ignorant - you mention that Hamish B completed the 'notorious' L&M transaction, but can you point me to where and when he spent hundreds of millions on it? I was under the impression the first payment made was $40M - and a second payment of $40M was "skillfully" triggered under the "strategic guidance" of current management?

Here is copy/paste of my earlier comment that prompted your question:
Definitely both gentlemen could talk! Bohannon talked up BRL well beyond sustainable value, raising hundreds of millions in outside capital . . . spending hundreds of millions to buy assets like the notorious L&M transaction . . . taking the share-price as high as $1.74 at one point . . . only to create a zombie/walking-dead company with a share-price that crashed to something below 5 cents per share by the time he exited.
==========

The L&M purchase was done in 2010. Where I learned the history was from Sourcewatch.org which provides an historical perspective on Bathurst's engagement in New Zealand from 2010 to end-2016. I cross-referenced the Sourcewatch commentary by reading the annual reports for Bathurst which are all available online.

Of particular interest are three of those annual reports.

1 - The 2010 annual report explains various capital raising exercises totaling $165 million for the year, as well as describing the purchase terms of the acquisition of L&M Coal - subsequently renamed "Buller Coal". The MD's letter (from Bohannan) describes the purpose of the capital raising as "to settle acquisition of Buller Coal from L&M".

Page 6 of the 2010 annual report describes the L&M purchase terms: a $5 million initial deposit; a further $35 million to be paid on settlement; two additional performance payments of $40 million each; a royalty payment of 1.75 per cent of gross revenues; and a grant of a 5 per cent equity stake in BRL upon shipment of 1 million tons.

2 - The MD's letter (also Bohannan) in the 2012 annual report stated that "The Buller Coal project was expected to inject $1 billion dollars into the New Zealand economy over 6 years".

3 - The 2014 annual report describes further capital raisings of $26.8 million as well as a financial write-down (non-cash) of $449.9 million of non-current assets such as mine-licenses and properties. The MD's letter (again Bohannan) states "the impairment is a non-cash adjustment and reflects the current value of the Buller Coal Project using the current international coking coal prices."

Connecting the dots from those 3 annual reports, I summarized Bohannan's tenure as MD/CEO, as above. My assumptions included operating costs to develop the Buller assets. I didn’t explicitly assign any notional value to either the 1.75% royalty on gross revenue or the 5 % equity stake in BRL, though I assume they comprised a non-trivial portion of the overall/over-time L&M purchase price.
Thanks Expat, you are correct about the 2010 capital raising. The raise price was A$1.05 if I recall.
By the way I appreciate the calm reasoning in your posts, presenting the other side of the story.
I take it your name reflects your residential status.. if so then we live in the same city and should catch up sometime.

Expand

Thanks, Irishmist.

Sure, I welcome your friendly suggestion to meet. Coffee during the working day, somewhere central - say along upper Orchard Road ideally; alternatively near Raffles Place - would work well for me.

Perhaps plan for one day after BRL publishes their annual report next week ?

With trading volumes still moribund, it seems patience remains the watchword. Interesting to speculate what - in hindsight, some time down the road - will turn out to have been the spark that awakens market interest in this (evidently still-ignored) counter.

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(20min delay)
Last 73.5¢		Change 0.005(0.68%)		Mkt cap ! $140.6M

Open	High	Low	Value	Volume
70.5¢	73.5¢	70.5¢	$218.2K	299.0K

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