Hi all, Hope everyone is well. It's been a while. Here are my...

Hi all,

Hope everyone is well. It's been a while. Here are my thoughts on last week's news with the coal.

GOOD

- CONFIDENCE: Management are seemingly showing an awful lot of faith in Hawsons. If they didn't believe Hawsons was a goer, then there is no way they would hand over the coal in order to focus the company's resource on this asset.
- CASH: Our cash balance improves by $1.5M, and we now hold approximately 2.2M GUF shares (0.5% of the company).
- SAVING: We will be saving approximately $500k exploration fees per quarter, and we will save approximately $10M in feasibility studies fees, by not comitting to the project anymore. Furthermore, if the project does make it to production, the capital costs would have been quite sizeable, so we do avoid this onus by handing away the project.

BAD

- ROYALTY: We won't be able to utilise it until mining commences at the FTB tenements (probably another 3yrs at least), and we are limited to no more than $5M per annum.

UNBELIEVABLE

- TIMING: There is absolutely no reason for this deal to have been done prior to the JORC. It's less than two months away, and could have added massive value to the interest that we had in the prospect. I'm still shaking my head over this...
- VALUE: So our cash balance improves a little, but no where near as much as is warrented. $4M? Geez, we've probably spent close to that amount in exploration ourselves up in the area. In other words, there has been next to zero value added to CAP through Hughenden, despite it being the largest thermal coal prospect in Australia. I would have been fine with handing back Hughenden, but only for the right amount. We have been seriously undercut here. This is the sort of asset that LNC struck that massive agreement last year with, and it is the sort of asset the companies are seemingly chasing after BND for right now with hundreds of millions of dollars on the line. It is not the sort of asset that you bend over and hand away for $4M!
- LACK OF COMMON SENSE: So now CAP is pretty much a one trick pony, unless we have some luck with Temora or Koonenberry. The company is going to live or die by how the Hawsons story pans out.
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As you can probably tell already, I'm really dissapointed in this deal. Even having spoken to the company and heard them plead their case, I still can't for the life of me work out why they had to do the deal prior to the JORC. I was given some excuse about the coal possibly being too deep where we had our interests, and GUF choosing to chase after the shallower stuff to the east (i.e. lower hang fruit principle). Have any of them heard of longwall mining? There is still immense value in 400m deep high quality thermal coal like what lies under the FTB land.

To be honest, I'm surprised the share price hasn't dropped more since the news. We are now a one trick pony of a company, and my views towards the board have changed dramatically. Sure, the BMG troubles have been out of the companies hand, but not this. The responsibility of this deal lies solely on the board, and I feel they have made a massive mistake. The silver lining to all of this is we avoid the opportunity cost of putting cash towards Hughenden that could be put towards assets that we own outright. Having said that, it will only be a good thing if one of them come up trumps. I've done a bit of research, and I do indeed believe the Koonenberry nickel prospect has a bit more potential than I originally gave credit for, but in the same breath I have to wonder why Vale handed it over for next to nothing if they truly believed it had good things going for it. It's hard to much last week's atrocious decision, but perhaps they were as silly to hand the nickel away as we were to hand the coal away? Who knows..

I haven't given some technical insight on CAP in a very long time, but it does look like we are developing a higher low in the mid 20s which oftentimes is the first sign of an uptrend in share price. Having said that, I strongly believe we will need a news catalyst to kick through the 30c mark, and right now I cannot see where such a piece of news could be sourced from in the short term.

I have held CAP as a strategic long term hold since I purchased the stock what seems like so long ago now. However, having seen the board hand away such a valuable asset for next to nothing, I will not hesitate to reconsider my investment strategy if this 'lack of common sense' pattern continues. As such, my sentiment has changed from LT Buy to Hold. Nick, Doug, Quentin and co all seem to think this is a great move for the company. Well they must know something I do not, because that JORC is going to be massive from what I can make out, and it could very easily leave them a little red faced when it is released.

At the end of the day, there is no use dwelling on the past, but I figure we will always be left wondering what could have been with the coal. Ultimately, what's done, is done and we must now look towards some news out of Hawsons over the next few months, and hopefully we hear of the end of BMG! With that May deadline now only eight months away, CAP are going to have to start speaking up sooner or later.