RE: Great news...618.9Million Tons M & I According to the Grande Cache website....
Proven & Probable reserves of 137 million tons + (Indicated / Inferred) resources of 346 million tons = 483 million tons
Grande Cache was acquired for $1 billion.
Note: A reserves / resources comparison between Cline and Grande Cache is far from apples to apples, but consider the following.....
1) Cline has zero Proven + Probable vs 137 million tons at Grande Cache...Advantage Grande Cache.
2), However, Grande Cache has zero Measured resources, (a higher category than Indicated) vs 300 million Measured tons at Cline.
3) Grande Cache's 346 million tons of resources includes Inferred tons, whereas Cline's 619 million tons of resources does not. There's a BIG difference between Indicated and Inferred.
4) Grande Cache's coal is premium hard coking coal vs. Cline's hi-vol B coal. That's a Huge advantage over Cline.
5) However, Grande Cache has serious and recurring geological issues due to very difficult mining conditions AND high costs per ton of coal, perhaps in the $120's or $130's? (does anyone know?) Walter Energy's Canadian operations are in the $120's-$130's. Recall that Walter acquired Western in 2011.
By comparison, the 43-101 technical report described Cline's geological mining conditions as favorable, (I forget the exact word, but it was the least difficult mining conditions out of 4 categories).
One might assume then that at $220 benchmark hard coking coal pricing Grande Cache is making twice or triple the per ton margin of Cline. Let's say triple. So multiply Grande Cache's 137 million tons by 3 = 411 million quality adjusted tons. To be clear, this adjustment is made solely to try to compare Grande Cache and Cline.
However, Grande Cache's 346 million tons, of which probably half or more are Inferred, may not be worth more than Cline's 300 million tons of Measured resources. So, let's leave Grande Cache's 346 million tons of Indicated & Inferred unadjusted. 346 + 411 = 757 million quality adjusted tons vs. Cline's 619 million. AND, that ignores Cline's 100 million tons of Inferred resources.
Again, Grande Cache sold for $1 billion vs Cline Mining's crrent Enterprise Value at $238 million.
Finally, Grande Cache is in production and SELLING coal. HUGE advantage over Cline.
However, Grande Cache has already been acquired, its not for sale. Western was acquired by Walter, its not for sale.
Paying $500 million for Cline is a very long-date call option on the futrue price of hi-vol B coking coal. $500 million is a drop in the bucker for VALE or Peabody or Teck Resources, and not a giant leap for Walter either. AS ALWAYS, I URGE investors to think about the $500 million cost to acquire the company as what it's worth to a real company. Vale, Walter, Teck or Peabody would
1) delploy a much better mgmt team!
2) have access to a much lower cost capital, to rapidly ramp production at the appropriate time, AND install a longwall
3) further diversify their existing coal portfolios
4) gain access to a new export route in Texas, and benefit from the expansion of the Panama Canal in 2014.
I continue to believe that Cline Mining is worth $500 million or more TO THE RIGHT OPERATOR. Walter, Peabody Teck should be looking to buy Cline. Brazil's VALE should buy Cline, as Cline can ship through the Gulf to Brazil more readily than anyone except for Walter.