COAL:
Bisichi Mining
- A miner that is actually profitable!
- Owns UK property (a dubious honour)
- Even pays a dividend!
Based in London but 62.5% owner of Black Wattle coal mine, South Africa. It is one of leading independent collieries and rising coal price helps. Partner is Endulwini Resources, a leading black empowerment company. Introduction in October in new Austrian continuous mining plant. This process works alongside more traditional drill-and-blast, but operates far more quickly. Increase volumes, higher coal prices.
Total coal reserves 15m tonnes, production up from 100,000 tonnes a month in Sept to approx 120,000 tonnes last month.
More interesting is the construction of a modern railhead so export via the Richards Bay Coal Terminal. Also has 3 year agreement with a major international coal trader to sell its coal at a fixed price. 30% of its coal is exported.
Exports and higher domestic prices mean it has been able to secure price increases of 21% in the first half of 2004.
It is one of the largest suppliers in SA of low-phosphorous coal principally used in metallurgical industry, where demand for stainless steel production remains strong. And the Minerals Act should provide scope for acquiring new acreage in SA.
There is also a retail property portfolio in the UK that was valued at the end of 2003 at £13.1m, or 125p a share. The mkt for town-centre sites has been strong, so the annual review carries out by Allsop’s could well provide a useful uplift in value. The properties are fully let, and provide rental income of more than £1m a year. Further asset-backing in the form of a share portfolio, with a mkt value of £546,000 at end-June 2004. These are weighted towards large mineral companies, so provides reasonable liquidity if realisation is required.
Recently appointed Evolution Securities as broker. Pre-tax profits estimated at around £1.8m in 2004 – a 21% increase on 2003. And, given the recent sharp increase in coal output in SA, coupled with the forward-selling arrangement 2005 is looking good. Assuming a conservative £3m profit in 2005, earnings could be as high as 20p a share, giving a prospective earnings multiple of around 10.
With strong asset-backing and growth prospects for 2005 and beyond is this an exciting opportunity? Assuming coal prices stay strong, the shares offer scope for decent capital appreciation, I think, possibly, maybe.
bisichi.co.uk
investing.reuters.co.uk |
