Upgraded Rating to Spec Buy

Upgrade from HoldStock in Comet Ridge has rebounded significantly in the past month, climbing ashigh as 16.5 cents, partly on an offtake deal with ASX listed explosives giantOrica (ORI), but mainly because the pathway to delivering strong returns from itsMahalo Gas assets in North Queensland looks more certain.There have been three developments, but crucial has been the processingsolution with the privately owned Denison Gas, which means COI does not haveto build its own plant. COI has also negotiated a 73km pipeline, which will linkproduction to the rest of the world. The pipeline connection would be built andoperated by Singapore owned Jemena (previously part of Alinta).Basically, COI is getting third parties to upgrade their processing plant and buildand operate the pipeline connections to the East Coast Australia domesticmarket.Mahalo North has adequate reserves for this project to be economic, of 43petajoules (PJ) of proven and probable (2P) gas reserves and 110 PJ of inferred,proven and probable (3P) reserves. The new pipeline will also be able toaccommodate increases in production expected from COI’s two other projects inMahalo.The first long-term offtake agreements was announced last week with Orica, toprovide the chemical company with feed at its Yarwun ammonium nitratemanufacturing facility in Gladstone, Qld.