Cline Mining Corporation T.CMK

CLINE COAL $11

[elefentman]

Date: January 14, 2011 7:36:59 AM GMT+02:00

Subject: CLINE COAL $11

sorryabout the quality of this. please note the upcoming catalysts for thestock and the fact that they think the stock could hit $11 as productioncomes on line.
mpartners
Cline successfully advanced the New ElkCoal Mine to production in Q4 2010 and is expected to produce over 1.2million tonnes of met coal in 2011 and up to 3.0 million tonnes in 2012.Cline could further expand production by converting to longwall miningat New Elk, developing its Lossan Coal project in BC and through newacquisitions.
EVENT
? Last week coalstock prices increased on the back of severe flooding in Australiawhich could disrupt met coal supplies for several months and a $225 pertonne Q1 met coal benchmark price was widely reported which represents a22% premium to our long-term met coal price.
? Cline received MSHA approval for its Phase 1 mining plan on December 23rd andwill produce up to 3Mt per year by 2012, yet there remains a valuationgap between Cline and established metallurgical coal producers such asWestern Coal and Grande Cache which have similar operating coststructures.
VALUATION
? Using amethodology whereby the 2012 EV is determined by adding 2011-2012capital cost estimates and deducting 2011 operating cash flows, wedetermined relative valuations that indicate Western Coal is trading at a7.5x 2012 EV to Cash Flow Multiple, Grande Cache is trading at a 5.8xMultiple, and Cline is trading at a 2.5x Multiple while our Cline TargetPrice of $5.75 implies a 3.7x Multiple (see Fig 1 and 2). We anticipatea gradual closing of this valuation gap over the next 12-24 months asCline’s production rates increase and by applying the Grande Cache andWestern Coal valuation multiples, this could support an upward reratingtowards $9 and $11 per share.
? We reiterate our BUY recommendation and twelve month target price of $5.75 per share. This valuation is based on a $185 per tonne long-term benchmark price and achieving an annual production rate of 3Mt in 2012.
? Upcoming catalysts include: o Jan 2011: Bulk sample
o Jan 2011: Updated resource estimate to include new coal seams o Q1 2011: Announcement of first client contracts and shipments o Q2 2011: Results of a longwall mining study o Q2 2011: Updated Feasibility Study including new coal seams
Memberof the Investment Industry Regulatory Organization of Canada (IIROC)Participating Organization – Toronto Stock Exchange and Toronto VentureExchange Member – Canadian Investor Protection Fund (CIPF)
Associate: Ingrid Rico 416.603.7381 x261 ir@mpa