RE: RE: RE: RE: RE: RE: RE: RE: RE: Greece`s usele Looking back at missed opportunities, managerial mistakes or poor communication skills is pointless. Looking forward is all that counts.
Cline has very valuable coal assets. A mine and related infrastructure that has the geological and physical attributes to produce up to 3 million clean short tons of coal per year from 10 continuous miners. All 10 CMs are on site. Cline has dedicated rail and port capacity and a prep plant that's working well. Cline's hi-vol B coal is currently out of favor, but in a better market it will find a home, and in a hot market it will command a strong price.
Looking further down the road, Cline will be exporting through the Corpus Christie, TX, an advantage compared to crowded east coast ports. Prospective customers desire security of supply, they've learned the hard way that diversification helps ensure security. In addition, customers gain from having access to more varieties of coal, enabling them to better optimize their plant-specific coal blends, (or minimize costs if need be).
An expansion / upgrade of the Panama Canal is scheduled to be completed in 2014. Few coal assets will benefit more from this upgrade. The owners of Cline's coal asset will be able to ship to Asia faster and at lower cost. By 2015-16 a longwall operation could be in place, boosting Cline's annual production to 6mm-7mm short tons. Once Cline's mine is up and running, nearby coal reserves can be acquired to extend Cline's mine life and/or increase annual production. These nearby reserves are stranded unless tied into the mining and infrastructure of Cline.
All of the above is possible and perhaps even likely over time. The hang up that many have is that these events seem too big a challenge for the existing management team. All I can say is, FORGET ABOUT THE MANAGEMENT TEAM, FOCUS ON THE ASSETS. How much is 400 million + tons (resource to be increased on or before May 24th) of hi-vol B coking coal worth?
More specifically, how much is that coal worth to an Arch, Peabody, Walter, Cloud Peak or Alpha Natural Resources? For many reasons, it's worth substantially more to an acquirer than as a stand alone asset. A better capitalized company could fund a more rapid ramp up at a lower cost of capital. An acquirer would greatly benefit from being able to expand its portfolio of coal product offerings. And, an acquirer would gain new export routes and geographic diversification. Key mining equipment from southern CO, could be shared among an acquirer's portfolio of mines.
For argument's sake, let's say there are 500 million tons of resource, of which half is, "measured," and half, "indicated." A comparison can be made between Cline's coal resources, and the price paid by Powder River Basin thermal coal producers for reserves that are auctioned by the U.S. government. Since March of 2011, the U.S.'s Bureau of Land Management, (BLM) has sold the right to mine 982 million tons of federal coal in Wyoming for slightly more than $1 billion. That equates to about $1 per ton for thermal coal that sells for $12-$15 per ton.
Assuming 500 million tons of resources, if one ascribed a value of $1 per ton, that would value Cline at $500 million. However, Cline's coking coal is expected to sell for more than $100 per ton, and at times well above $100. I believe that Cline's coal could be worth MORE than $1 per ton to a financially stable and experienced coal operator.