coal deals

OK, I'm trying to track whats happened, and what it means for Lion.

The relevant announcements are 8 Feb, 21 April and the quarterly report of 29 April.

Essentially, Lion are fronting working capital to an Indonesian coal mine with export contracts to the Phillipines.

We dont have explicit reference to how much money, but about A$2m went out of the company as a loan in the quarterly, so thats a good guess.

We also dont know the interest rate, or the exact security, but my guess is that they would be earning 25% on the deal ... factoring can be profitable.

It can also be risky - I'm sure Timing, Yogi et al will provide us with a comprehensive list of what can go wrong doing business in Indonesia (short answer : everything).

The thing to watch for isnt Lion playing factor, it's Lion picking up coal blocks. South East Asia needs lots of energy, and King Coal is cheap and available (ok, it's also an ecological disaster, and you'd be amazed how lung problems blow out your health budget).

Oseil should also be providing good cash flow ... it's only 2.5%, but at these prices, thats well worth having.

In short, I still think LIO is worth a cent and a bit.

Ian Whitchurch