Colonial Coal Jumps on Coal price and bid rumours

Colonial Coal (TSX.V: CAD)

The share price of Colonial Coal has risen sharply over the last month as there seems to be feeling in some quarters that the company might finally be on the radar of potential bidders, looking to secure a supply of coking coal for the future.

It has long been thought that Colonial could receive bids from either Chinese or Indian companies, but Japan and Korea are also potential sources, as well as the USA of course.

 

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Colonial Coal TSX.v : CAD
Stage Exploration
Metals Metallurgical coal
Market cap C$240 m   @ C$1.38
Location British Columbia, Canada

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Colonial Coal Flatbed map

Colonial Coal Flatbed map

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Colonial Coal Jumps on High Coking Coal price and bid rumours

 

Colonial Coal (TSX.V: CAD) The share price of Colonial Coal has risen sharply over the last month as there seems to be feeling in some quarters that the company might finally be on the radar of potential bidders, looking to secure a supply of coking coal for the future.

It has long been thought that Colonial could receive bids from either Chinese or Indian companies, but Japan and Korea are also potential sources, as well as the USA of course.

One question being asked by shareholders and those interested in investing in the company is what would a bid value the shares at?

Currently CAD is valued at a mere 38 Canadian cents per tonne of resource in the ground!  FOB costs to the port are around C$130 – C$150, so this normally low margin bulk commodity that is currently selling in China for over C$400 has one heck of a margin…

Clearly capex needs to be taken into account, but even so, CAD looks so undervalued it’s not true.

The graphics below illustrate perfectly the potential for share price appreciation and the creation of shareholder value, giving various price points that a bid might be received at per tonne of coal, and the resulting share price.

The investment thesis looks compelling at this low share price in my opinion, the world needs steelmaking coal, they are still building steel mills powered by coking coal in Asia currently, there is no substitute for coking coal at present.

 

Colonial Coal

 

CAD calcs 011021

 

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The Colonial Coal website can be accessed HERE

 

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Disclosure

The writer is a shareholder of Colonial Coal, bought in the market at the prevailing price on the day.