Waratah Resources inks deal for sale of Indonesian thermal coal cargo

August 03:

Waratah Resources (ASX:WGO) is selling a 55,000 tonne trial cargo of thermal coal from South Kalimantan, Indonesia, to an international coal trading company that could lead to a series of further revenue generating transactions.
Possibly, the key to ongoing shipments and cash flows and earning generation is the strong business relationship it has developed over the past nine months with its Indonesian partner for supply of thermal coal from a long term producing mine.

This could in turn result in a longer term supply agreement, in line with its goal of delivering cash flow and profit growth from its commodities trading arm

The cargo of coal is expected to be dispatched in late August 2014.

The agreement will be the first transaction where the company has owned and on‐sold the cargo.

“This is another significant step forward in the development of Waratah’s Commodities Trading Division,” executive chairman Ben Kirkpatrick said.

Indonesian Coal

Waratah is focused on supplying thermal and coking coal from its Indonesian mining partners to its end user customers in China, India and Korea.

This includes a particular focus on long term off-take agreements.

It had on May 2014 dispatched in conjunction with its Indonesian partners its first 50,000 tonne cargo of thermal coal from Kalimantan to Shanghai, China.


This cargo arrived in June 2014 and represented the first confirmation of its strengthening commercial relationships with Indonesian partners, Indonesian coal producers and end users throughout Asia.

Potential further customer relationships are also being developed in Taiwan, India and South Korea.

This is part of its strategy to develop and scale up this business in a profitable manner within appropriate risk management protocols.

Corporate

Waratah had on 19 June received a research and development tax refund of $497,947 from the Australian Taxation Office.


The company has cash on hand totalling $860,637 as at 30 June 2014.

It also holds the Mekambo‐Est Iron Ore Project in Gabon and Okanabora Iron Ore Project in the Republic of Congo.

However, no exploration activities were conducted on either project in the June 2014 quarter.
It had in February raised $1,297,500 through an oversubscribed placement of 43.25 million shares priced at $0.03 each.
The company had also on 14 February 2014 executed a Heads of Agreement with Marylebone Capital Corporation Pty Ltd (MCC), which includes former Australian cricketer Brett Lee as a shareholder, regarding a joint venture.

MCC is a boutique investment house specialising in direct and indirect investments in resources, property and other asset classes.


Waratah and MCC are conducting joint negotiations with several coal producers in Indonesia and have signed a co-operative Heads of Agreement to reflect this joint venture.

Analysis

The agreement to sell the trial cargo of thermal coal to the international coal trading company is a key step in Waratah Resources’ goal of establishing a steady revenue stream from commodities trading and related activities.

It has also developed a strong relationship with its coal producing Indonesian partner which differentiates Waratah from peers.
The company also distinguishes itself from other small-cap resource companies with its dual track strategy which aims to deliver both cash flow and profit growth in commodities trading while seeking cost effective strategies, capital and partnerships to develop its resource projects in Indonesia and 
Africa.

This targets the delivery for sustainable shareholder value and open access to potential opportunities within the commodities sector.

It also presents a unique investment opportunity as a Commodities Asset Manager with a current focus on delivering coal to end user off-take partners.

Share price catalysts ahead include:

-    Shipping further cargos of coal to the international coal trading company;
-    Establishing a long term supply agreement with the customer;
-    Securing other coal buyers.

Recent developments include the receipt of a research and development tax refund of $497,947 in June, shipping in May its first 50,000 tonne cargo of thermal coal to Shanghai and executing on 14 
February 2014 a Heads of Agreement with Marylebone Capital Corporation, which includes former Australian cricketer Brett Lee as a shareholder, regarding a joint venture.
Proactive Investors considers the agreement to be share price accretive in the short term from the current price of $0.015.  Cash is king in this market and Waratah is on track for further cash flow generation.
Proactive Investors Australia is the market leader in producing news, articles and research reports on ASX “Small and Mid-cap” stocks with distribution in Australia, UK, North America and Hong Kong / China.

Source:  www.proactiveinvestors.com.au/companies/news/56686/waratah-resources-inks-deal-for-sale-of-indonesian-thermal-coal-cargo-56686.html?

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