paringa Resources PNL 2

Paringa Resources (ASX:PNL) has expanded its bankable feasibility study to include the second coal seam at the Poplar Grove Mine. Adding this seam resulted in an increased production rate of 2.8 million tonnes per year, whilst the initial capex would increase by less than 12% to US$45M.

The Poplar Grove Mine is now indeed expected to produce 2.8 million tonnes of coal per year at an all-in cost of just belos US$30 per tonne. This should result in an average EBITDA of $67M (+72% due to the higher production rate) whilst the NPV8% increases to US$310M with an Internal Rate of Return of 42%.

paringa Resources PNL 1

These economics are absolutely excellent, and emphasize the importance of including the second seam in the mine plan. Keep in mind the Poplar Grove mine will be just the very first part of Paringa’s plans at the Buck Creek complex, and the company still plans to develop the Cypress mine as well. This would boost the combined output to 6.6 million tonnes of coal per year resulting in an average annual EBITDA of $163M and a NPV8% of US$655M. Note: it’s unclear whether these NPV’s are pre-tax or after-tax.

This excellent result confirms why we consider Paringa to be one of the best coal companies out there. The low capex and opex result in superior economics, and the company now seems to be a prime takeover target for a larger company as we think an Alliance Resources (ARLP) could be very interested in adding another low-cost mine to its production profile.

Paringa’s share price has increased by 176% since our most recent article from August 2016 and the company is now raising A$54M in equity at A$0.52 per share to fund the construction activities.

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The author has a long position in Paringa Resources. Please read the disclaimer




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