Continental Coal (ASX: CCC) is an established South African thermal coal producer, with a portfolio of producing and advanced coal projects located in South Africa's major coal fields. The company has two operating mines, Vlakvarkfontein and Ferreira, producing 2Mtpa of thermal coal for the export and domestic markets.
Continental Coal receives bullish 12 month target from US Investment Bank Madison Williams
US Investment Bank Madison Williams has placed a bullish $0.09 twelve month price target on Continental Coal after initiating coverage on the company, which is 64% higher than the last traded price.
Continental Coal (ASX: CCC) last traded at $0.055, but US Investment Bank Madison Williams has placed a $0.09 twelve month target.
The following is an extract from the Madison Williams report.
Poised to Emerge as a High-Growth Mid-Tier Coal Producer in South Africa
We are initiating coverage of Continental Coal Ltd. (CCC), an ASX-listed South African coal producer/exporter, with an Accumulate rating and a 12-month price target of A$0.09.
Strategically well positioned to benefit from increasing
Asia-Pac thermal coal demand. In recent years exports from Richards Bay Coal Terminal (RBCT) have shifted
toward India and China (at the expense of Europe).
CCC is highly leveraged to this trend.
Recent initiatives such as the Mashala transaction have laid a solid foundation for growth
Continental now has an established infrastructure, an experienced management team, RBCT export allocations and an impressive resource base (600 Mt in South Africa and a 6-7 Bt exploration target in Botswana).
Management is targeting 7 Mtpa in ROM production by 2012
While ambitious, we believe CCC is poised to substantially increase production up from its current capacity level of 2 Mtpa from two operating mines.
A third mine (Penumbra) is expected to start producing by early 2012, and a decision on development of a fourth mine (De Wittekrans) is expected by July of 2011.
Strategic relationships with major players such as EDF and Eskom
The first thermal coal exports were completed through a strategic off-take and financing relationship with EDF Trading.
Also, coal mines are well positioned to supply the growing needs of Eskom, the domestic utility.
Our rating is Accumulate
Our 12-month price target of A$0.09 is based on a NAV analysis.
While we believe the longer-term upside is significant given EBITDA ramp-up potential, we continue to monitor resolution of macro issues (infrastructure, regulatory) as well as successful/timely execution on the two upcoming mining projects.
Company description
Continental Coal is an emerging mid-tier South African thermal coal producer/exporter with current production and development operations in South Africa and exploration operations in Botswana.
The company is listed on the ASX under the ticker CCC and was recently cross-listed on the OTCQX exchange in the US.
As a result of the company’s acquisition of Mashala resources in 2010, Continental has a pipeline of near-term development projects in South Africa and 6-7 billion tonnes of exploration targets in Botswana.
Continental has a targeted production of 7 Mtpa ROM coal by 2012, an off-take and funding agreement with EDF Trading for its export thermal coal production, and a recently signed joint development agreement with KORES, Korea’s state mining and exploration company, for one of its prospects.
