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Tigers Realm Coal Ltd receives government support, shares rise

The updated co-operation agreement and the certificates of residency in the ADZ represent two important milestones for Tigers Realm as they progress towards coking coal production.
Tigers Realm Coal Ltd receives government support, shares rise

Tigers Realm Coal Ltd (ASX:TIG) share price has more than doubled since the beginning of September with the company most recently receiving government support for its coking coal assets in eastern Russia.

During the recent Eastern Economic Forum in Vladivostok, Tigers Realm signed an update to its co-operation agreement with the Government of Chukotka.

The company was also formally awarded certificates confirming its residence in the Beringovsky Advanced Development Zone (ADZ).

The ADZ was created by Russian legislation to provide an attractive investment and administrative framework for investors and companies operating within the zone.

Tigers Realm aims to be producing coal from the Amaam Coking Coal Project located in eastern Russia by late Q4 2016.

Timing is fortuitous with coking coal prices rising as high as US$190/t through September, nearly double the prices at the beginning of 2016.


Background


Two tenements, Amaam and Amaam North, together comprise the Amaam Coking Coal Project, located within 35 kilometres of the Bering Sea coast in Chukotka Autonomous Okrug, far eastern Russia.

Tigers Realm has 80% ownership of Amaam and has recently signed a Heads of Agreement which will see its 80% ownership of Amaam North increase to 100%.

In addition, the company owns 100% of the Beringovsky Port and Coal Terminal, located 35 kilometres to the north east of the Amaam North tenement.

Amaam and Amaam North have combined JORC compliant coal resources of 632 million tonnes with the majority of these resources being of coking coal quality.

Project F within Amaam North has 110.6 million tonnes of coal resources, 16.1 million tonnes of which have already been classified as Product (Marketable) Reserves under JORC.

Tigers Realm aims to commence coal mining late in the fourth quarter of 2016 at Project F: Phase One.


Updated co-operation agreement


The primary purpose of this agreement is to further strengthen the relationship and co-operation between Tigers Realm and the government in developing the Beringovsky coking coal basin and constructing the necessary transport, logistics and energy infrastructure.

The Government of Chukotka has undertaken to assist the company:

- To obtain the necessary permits for conducting its project activities;
- To employ locally qualified personnel for the company’s operations, and secure federal subsidies associated with the deployment of employees to Chukotka;
- To access infrastructure and production facilities owned by Russian municipal and regional governments on economically acceptable terms during the entire term of the company's projects; 
- Cooperate with Russian Federal executive bodies performing regulatory activities and servicing of infrastructure facilities; and
- In the development of economically acceptable requirements in relation to the design and reconstruction of border and custom control points at Beringovsky port.


ADZ benefits


As a formal resident of the ADZ, Tigers Realm is able to take advantage of benefits which include:

- Preferential customs regulations and exemptions from some import duties and customs Duties;
- Easier regulations for employing foreign staff in the event of a shortage of local workers;
- The opportunity to receive co-financing from the sovereign Russian Far East Development Fund;
- Exemption from taxes on revenue, property and land for the first five years of the implementation of the company’s investment projects; and
- Reduction of social security payroll tax from 30% to 7.6% for the first 10 years of company’s activities.


Analysis

The updated co-operation agreement and the certificates of residency in the ADZ represent two important milestones for Tigers Realm as they progress towards coking coal production.

The updated co-operation agreement with the Government of Chukotka shows a strengthened relationship which is important for developing the Beringovsky coking coal basin and constructing the transport, logistics and energy infrastructure to support the company’ projects.

The certificates of residency in the ADZ provide Tigers Realm with valuable benefits that include looser regulation, tax breaks and the ability to receive financing from Russia’s sovereign fund.

Looking ahead, the near term development of Phase One of Project F will be an important milestone and value catalyst for Tigers Realm as it looks to become a significant supplier of coking coal.

Given the cost advantages, Project F has the potential to be one of the world’s lowest cost coking coal producers.

Thanks to a low stripping ratio compared to competitors, short overland transport, and company owned infrastructure, site operating costs are expected to be between US$39 and US$45 per tonne FOB.

With hard coking coal prices rising as high as US$190 per tonne recently, this project has significant opportunity to generate strong cash flows for Tigers Realm.

 

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