Pacific American Coal Research

Pacific American Coal Research

PAK has a 257Mt resource of PCI and hard coking coal. A 2Mtpa hard coking coal mine located at Elko with a cash operating cost of US$65-90/t, a pre-production capital cost of US$235M and a 10 year initial life would have an NPV after tax of around A$229M (Discount 10%, coking coal price US$140/t), giving an idea of the potential upside if PAK can deliver a project like this. Our risked valuation of PAK is A$50M or A$0.30/sh.

PAK was sold down over the last two years on project inactivity, but that is about to change dramatically. The company has spent its time selling non-core assets to raise cash and seeking approvals. PAK is now in the field drilling an up to 8500m program, that will likely extend and clarify its hard coking coal resources, and may allow reporting of a maiden reserve.

The market has seen some impressive coal asset deals in the last 12 months. Of most relevance to PAK is the Jameson- Bathurst deal, which would price PAK at A$33M capitalisation, or 3x the current figure, on just the 13.5Mt of surface coal mined to prepare the flat ground required for the underground support facilities identified by the 2016 Hatch Study.