Regency Mines has a significant coal mining interests in the United States. The Rosa coal prospect is metallurgical grade coal used for the production of steel. Below is an abstract from a recent analyst note (see here) regarding Regency Mines coal interests.
The price of metallurgical coal has been rising steadily since 2016.
We now have Trump putting significant tariffs on steel imports (see here). These tariffs for steel can be up to 25%.
What will the impact be on the value of Regency Mines metallurgical coal interests located in the United States? It would be reasonable to assume steel production in the States will increase, increasing the demand for Met coal driving up the cost of Met coal.
Regency Mines in the analyst note they commissioned, stated they expected early profits to come from their Met coal interests.
With the Trump news yesterday you would expect this to be a significant catalyst to:
a) remove barriers, preventing early production of Met coal from happening.
b) increase the early profits RGM are expecting from their coal interests.
It looks like the long awaited returns from Regency Mines coal interests are about to materialise. Trump is turning Regency Mines American coal interests into a ‘gold mine’.
The market for metallurgical coal in the United States is increasing predominantly because it is required for steel production.
The following table indicates some key reasons as to why the price of steel is increasing.
With the positives around steel it is hardly surprising we are getting coal companies announcements such as:
- Contura Energy are in the middle of a $162m IPO (see here).
- Warrior Coal have record income of $129.9m in Q2 2017. Warrior’s highly successful second quarter validates their value proposition as the only publicly traded ‘pure-play’ hard coking (metallurgical) coal operator in the U.S. (see here).
U.S Coal global research firm IHS Markit also pointed out that metallurgical coal revival isn’t just dependant on Trump infrastructure projects.
Probably the single biggest driver of the surge in exports is that there is international demand for U.S. metallurgical coal right now. “That is a function of the market rather than the political environment.”
Regency Mining are well placed when production commences to deliver much needed metallurgical coal.
It would appear the recent RGM RNS indicating coal projects are not now going to be progressed piecemeal but the ‘big picture’ route taken is based on some solid foundations..
Regency issue newsletter highlighting their plans for coal production (see here).
Some of the key highlights:
- Regency focusing on ‘cheap production of expensive coals‘
- Focusing on metallurgical coal rather than dirty coal. Required for steel production.
- Rosa announced coal reserve of 453,000 tons is very low as:
- Based on 300′ auger rather than 1200′ Highwaller mining.
- more coal identified
- Val has 100,000 tons/month production target
- production / revenue stream imminent.
- RGM have first mover advantage.
- Rosa coal at $130/t = $4.5m net attributable profit.
As news is released the share price will react accordingly. It is clear from the newsletter that further information is going to be released to the market.
The business is aware figures released to the market are conservative. We await the revised NI 43 101 report and also for RGM to release actual coal outputs. The market will then realise the business is undervalued.
The Regency Mines RNS today (see here) highlighted two significant developments:
1. Rosa – mine permits in place and production has commenced with a weekly revenue stream.
2. Vali Carbon Corporation – 50,000 tpm offtake contract being negotiated.
The following graphic indicates that based on Vali Carbon Corporation alone the revenue for RGM will be a minimum of £9.3m per year and if output reaches 100,000 tpm £18.6m.
These revenue figures take no account of:
- Rosa – year 2 production expected to be 120,000 tpm = revenue of £22.32m/year.
- Rosa – Highwaller production could reach 600,000 tpm = revenue of £111.6m/ year. Being conservative and assume only 50% efficient = £55.8m
- Washed coal revenue of $8 / ton
- Other coal opportunities indicated in the above graphic.
- Regency Mines interests in Motzfeldt, Horse Hill, Mambae and Curzon Energy.
Based on information in the public domain you have to question how the market cap of the business can remain c£5m for much longer.
What will be the catalyst resulting in a share price rerate?
Will it be?
1. The 50,000 tpm offtake contract currently being negotiated being announced to the market.
2. Market realising the implications of the revenue streams and significant under valuation of the business.
3. Announcements from the company regarding their other investment interests.
Maybe as the FCA are ineffective the Americans will one day swoop and arrest those who blatantly manipulate the stock market.
The Americans take years to act but when they do action is swift.
NB: If you are a private investor and looking for a forum free of trolls, join Blueshare.
The RNS on the 19th May (see here) regarding the issue of new shares completes the purchase of iter8.
The acquisition of iter8 provided a route for Quindell to enter the North American Insurance Market, particularly Canada. The iter8 website states business acquired to aid expansion of Quindell Insurance technology into North America (See here).
Acquisition also provided access to the customer base of iter8. Examples of blue chip customers being:
What is interesting is the original plan was for shares to be issued in three equal instalments with the last instalment not due for another 12 months (see here).
Why have Quindell decided to conclude the deal 12 months early?
Could it be they are preparing the ground to list part of the remaining business in North America?