bhp to invest in coking coal, page-9

Where there's smoke , there's fire:

I guess most of you have already seen this mention of the BHP / RIV in the SMH 24/09:

FRIEND OF MINE

BHP Billiton has recently bemoaned the lack of available takeover targets that fit its requirements for scale and quality, although its chief commercial officer, Alberto Calderon, said it was examining four or five specific opportunities quite closely.

There has been recent talk among bankers, and now Citi analysts, that one of the few targets that would fit the bill for a company such as BHP is locally-listed Riversdale Mining, which owns a large chunk of a truly world-class coking coal province in Mozambique.

But those hoping for an immediate takeover are likely to be disappointed. The company is unlikely to be a serious target for at least a year. Next September it expects to submit an environmental impact statement as part of its quest for permission to barge large amounts of coal down the Zambezi River.

Riversdale envisions its Benga project, with a 4 billion tonne resource, could produce 20 million tonnes of quality coking coal a year, meaning it could make a difference even to a company the size of BHP. India's Tata Steel has a 35 per cent stake in that project.

" Also, Riversdale will release a maiden resource statement for its wholly-owned Muarazi West project next month. Over the longer term, that project could potentially be larger than Benga, although it would be totally dependent on barging.

Riversdale has a tight share register, dominated by Passport Capital, Ken Talbot's Talbot Group and Tata, which means any deal would likely need to be friendly. The management team, which includes two former RBC Capital Markets investment bankers, is pragmatic and expects the company could eventually be sold to a larger player, with barging approvals seen as the catalyst. "


Watch this space! The barging option has been investigated over the pas 12 months, and to date, the studies have been very positive (see prior RIV reports on this). SO if they are up to the stage of seeking approvals, then barging is a goer.

This is very significant, as barging will save something like $20 /t, loaded onto ship, over rail.

RIV can also ramp up barge capacity as required. The rail has a fixed capacity of about 20 Mt p.a. and they are fighting with VALE over this capacity. This will all be used for the Benga lease.

I have has a look at the locations of Benga and 946, and if it turns out that they are part of the same continuous coal seam, then we can expect a HUGH maiden resource.

In fact, the resource will be so big, that its size is no longer the driving factor for the company valuation. What becomes important, is how they get the coal to market.

Current dip is handing accumulators a great opportunity. As always, please DYOR.

Cheers, Skip