Thanks weesa.All is not lost with 1 set of quarterlies!A down...

Thanks weesa.

All is not lost with 1 set of quarterlies!


A down XAO day, US coalers up, NMR peers up and/or improving - oh the rollercoaster that is NMR!!!

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The market hates uncertainty.

I think a few such UNCERTAINTIES spooked the NMR buyers/sellers today - so I will list what i see as causes - but also the upside/facts of each for a brighter view this evening.

Yes - I is positive on the NMR story - so take all this with a pinch of salt please!


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UNCERTAINTY 1) Mention of 84.7 million shares placed at 2.6 cents

Facts: Ladies and gents, these were placed right at the start of November 2011, and all holders with more than 3 million shares have long gone - or are still happily holding and or averaged down and or free-carried.

There will not be a mass of sellers of 2.6 cent shares. The bulk of shares in that raising have changed hands already. 2.6 cent shares are "done and dusted", in the past.

The cash has been used to drill and analyse the Botswana holdings, and proceed with the TRIPROP buy-in.

NMR is now in a much better position with the assets held.

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UNCERTAINTY 2) Burn rate was higher than expected

FACT: They anticipated that they would use up about $800 million - but went over. They always do go over a bit! Nothing too far out of the ordinary here!

They still have more than $1.3million in the bank!!!

Last few quarters were less than $1million burn rate so we may well have 3 months money and some if they can stretch it and get some oppies in too.

It seems that the previous cap rasings only happened when the balance fell below the "magic $1million" mark. We have a small buffer at very least. Next quarter estimate expense is $700K, so lets cal it $900k to be safer?!

We still have good benefits for the spend during the same time period - and still have cheap coal in relation to the peer group. CCC, HDG, AVA, AFR all doing good. This improves out EV/tonne ratio every day they rise.

Also we do not know what is going on behind the scenes. Perhaps there where a few extra costs, but perhaps too, some of the costs of the scoping study have been paid for also - ahead of time even? We do not know for sure. But the uncertainty may also hide some positives too. They have not disappointed yet!!

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UNCERTAINTY 3) Relinquishing of the Limpopo prospect.

FACT: Yes - a bit disappointing at first glance, but this is in some ways a blessing.

NMR have repeatedly stated they will focus the vast majority of available funds/resource on progressing Takatokwane - that this is there "flagship project" - and passing up on Limpopo is proof of their word. They have share holder value in mind - and seem genuine about it.

There is a growing amount of thermal coal resource appearing in Botswana (though moratorium on new explore licenses is holding this back!!!), so NMR is in some ways, wise to limit the amount of thermal coal proved up elsewhere - and improve the quality of Takatokwane into an inferred resource at speed - giving larger buyers confidence to take a further share in NMR.

We still got Speccie Reef etc - as stated in the Quarterly.

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UNCERTAINTY 4) The thought of a cap raising has entered the minds of many today - perhaps giving the jitters to some retail holders, and a chance for others to sell down - giving the appearance of "the sky is falling".

FACT - ASSUMING THAT A NEAR TERM CAP RAISING IS EVEN PLANNED BY NMR:

The last raisings were within about 15% of the previous 15/30 day VWAP - in the middle of a very tough 2011. We would imagine they would follow a similar pattern - if not higher prices (given the relatively low amount of cash required to carry on and the new improved story that NMR now have to sell).

2.6 cents when trading at about 3.2 cents
6.0 cents when trading at about 7.25 cents

Things are looking OK if they raise similar volumes of cash at recent 2012 VWAP - in a better looking 2012. They will not raise for peanut prices - nor do it at the worst time.

Every 0.5 cents down is about half a $million out of directors pockets. Would you want to kill the price if you was in that position?

For example, wessa has stated that the NMR 30 day January 2012 VWAP is 5.5443 cents.

Drop that even to about 4.6 cents for a bargain for sophisticated investors (yes 4.6 sounds a bit scary!)

An extra $1.25 million divided by 4.6 cents would mean and additional 27 million shares. That's only about 6.5% dilution to keep the wheels turning.

Remember - we are hoping for relatively near term benefit/income from value added coal products..... of course at cost also. Scoping study soon.

Yes the price could drop to that or lower on no news, but we would have some sort of new "base" - as it did in times past. The downside is somewhat limited - given the recent buying, holders, improved fundamentals.

And we do have news due - both from NMR and from Botswana.

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UNCERTAINTY 5) Recent "disappointment" in the South drilling.

FACT: NMR have found very thick seam 2 coal - we now have something similar to AFR on the thicker coal seam front.

The window of exploration to define an inferred resource has been narrowed very quickly - and NMR will now be able to focus funds and efforts to bring on INFERRED JORC with the minimum of waste.

As time permits - other seams may be included and we may see the resource estimate / JORC grow.

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UNCERTAINTY 6) A little bit of bashing of the resource is going in in "Planet HC".

FACT: The resource/find is of similar if not better quality to the "crud" that AFR HDG AVA have found too.

This would mean they are worth not much either???!!!

This argument has been thrashed out here on HC many times - and I am sure holders / traders in some way believe China/ India etc are buying similar thermal coal (all-be-it low grade).

We do not have top notch geo's here for nothing. Walkabout bought this for a reason.

DJC may talk it up a little - but do not bankrupt their reputation on purpose.

Yes its not coking coal - but its a lot of thermal coal!

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UNCERTAINTY 7) Some have said that the management of NMR are not very flash for revising the first of last weeks announcements.

FACT: We cannot have it all. They have a small, busy crew of experts who don't have all the time in the world for spell-checkers.

The lack of "polish" comes with the benefit of a relatively low cash burn rate (yes we did use a bit more this quarter).

Perhaps ASX asked them to clarify their statements. So what? They did, and did so promptly if that is the case - showing their diligence.

We have a very decent team of directors pursuing the findings as we speak. NMR has repeatedly told us they are in touch with the Botswana government - who are very impressed with the progress.

In fact, I was very surprised to see my email returned by Chris Mason today. Not surprised to receive a reply - but surprised by the fact that he is back in Botswana! No doubt he will be in touch with all regular contacts while he is there. The story is not slowing down

These guys are pushing this ahead as quick as they can.

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UNCERTAINTY 8) It is just a minnow!

FACT: I agree!! But this company does hold something of value. One only needs to look at the top 20 list of its peers - to see the type of institutions and investors that are looking at Botswana thermal coal explorers. They will be looking at NMR too no doubt.

DJC pointed out that NMR have a relatively high Infrastructure and Market risk here at NMR. We have all done our research and understand the pros and cons of this.

However, DJC also pointed out that the country and liquidity risk is low. Not Medium. LOW!!!

This makes NMR a sort after little proposition. They have a great story that retail traders can easily understand (and which NMR they rely on at this stage to get the company in bigger $$$ leagues), NMR have a real asset that is improving every day, shares trading hands with decent volumes every day.

However with such a small MC, and a large group of flighty retail holders/traders - bigger traders can push this hard and fast in either direction - for cash gain or an increased holding - whilst frightening the "masses".

Confidence is every thing here! The story has not changed today. We knew almost all the same info as last week - though without the finer details.

Big players are here - apparent by the top 20, trading volumes and our recent mystery "big bidder". You have to have some backing to put up a bid like that - real or not.

People are messing with this - whether the story is good or bad. SP is a separate entity! Hence the required caution in trading!

Bigger traders do not play fair - they know every dirty trick in the book.

I spent many hours talking with a good friend visiting from OS last week - who works right in the middle of the Chinese stock markets - and the Chinese private equity market (which is his present job).

Even the large, cash strapped companies he has been in, have been beaten at there own game at times - buying in big into certain company, only to see the price forced down by even bigger players - players who know the others strategies and company loss policies. And of course on forced selling - he has seen the price climb away once the other crew has "won". And we are no talking "chicken-feed" dollars/gains either!!!

Yet, he assured me that the fundamental analysis of NMR going on here at HC and DJC is of a high standard compared to what he has seen in his dealings in the industry.

People have picked this company to pieces and know many aspects - as he said - aspects that are hidden from view in the Chinese markets.

We are not crazy - to story has value - it's just that the SP can be manipulated very easily.

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Just a few thoughts to ponder - and yes, needless to say - a bit of an ouch today!

Watching for a bounce and vote of sentiment either way tomorrow.

All the best - and please understand I am bullish on this story for now. Please DYOR!

bsh