RE: RE: RE: Great news...618.9Million Tons M & I You're right, WLT is developing its own brownfield coking coal reserves, so they will not buy Cline. I should forefit my CFA.
You fall into the same trap I keep warning against. Cline has not produced or sold tons, therefore the likes of a Peabody could not produce or sell tons. First of all, production is no longer the issue, only the sales contracts. How much better do you think Peabody could operate this mine then Cline? You said 70% of HCC as a price for Cline? Well that works on $220 HCC coal. That works just fine, and Peabody would make sure that the costs are as good as they possibly can be. Peabody has its own trading subsidiary. I imagine that Peabody could sell Cline's coal a lot quicker and a lot easier than Cline can!!
A buyer of Cline is not just buying a $220 coking coal future, a buyer is getting a cheap option on $300 coking coal. Even if Cline's costs are $10-$20 higher than they claim, you have to admit that it would all work great at $300 coking coal, or $270 for that matter.
What are the chances we see $300 coking coal in the next 3-5 years? I would say a significant chance, although I'm not predicting anythin. I keep coming back to this, if Cline's costs are higher than they claim, Peabody more than anyone should be able to get them lower. Peabody is already operating in Colorado, they could share equipment and labor, who knows what else. The technical report said that Cline's geological conditions are favorable. Doesn't that suggest the possibility that Cline might be close on their estimates of mining costs?
The entire company is on hot idle. 619 million tons of resources ready to go when the coking coal market improves. A lot of money has already been invested. The prep plant works well, they have throughput at a port in Texas, they have rail capacity to Texas...Put Peabody in there and see what this mine can do.
Buying the Cline mine would be Peabody's stamp of approval that the mine is economically viable. Of course, Peabody and other suitors would have to do proper due diligence, and of course, maybe the coal isn't what it's said to be, etc. I'm making the assumption that mgmt is not outright lying and that the lab tests were not falisfied and that Wood Mac did not fudge its report on the quality of Cline's coal.