Coal is still king in the world power game despite its blackened name

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29 Jun 2008

BETWEEN 2005 and 2007, thermal coal prices averaged a little more than $US50 a tonne. Now the price is more like $US170 a tonne, despite all the talk that coal's days as the backbone of the world's electricity generation system are numbered. So what value is meant to be ascribed to a tightly held explorer with a good shot at outlining a "starter" 100-million-tonne resource of the black stuff in the near term? Particularly when its project is in close proximity to the boom in demand from the string of coastal power stations India plans to build.
That is what is being played out in Rey Resources, the June 2006 float that holds a big tenure position in Western Australia's Canning Basin, where the potential is said to be for more than 1 billion tonnes of coal.
Rey climbed 3¢ to 32¢ on Friday, a 10.3% advance when just about all else around it headed south. Now that it has done the hard yards with Aboriginal groups, Rey is punching its first holes into the region's coal seams, some 150 kilometres inland from Derby.
Any number of groups have explored the Canning in the past for coal, some with a focus on its higher-value coking coal potential. Rey's focus is on thermal-quality coal and it has set itself an initial target of getting a 100-million-tonne resource under its belt.
Samples are heading off to labs now to confirm the quality of the coal and assuming that box is ticked, interest in the project's potential will switch to the group's initial resource estimate, likely in the first quarter of next year.
It is worth noting that access through the port at Derby to Indian and Asian markets would be about four days closer in sailing time than alternative supplies from the infrastructure-constrained Queensland industry.
Cheering Rey on is its 15% shareholder, Gujarat NRE, the Australian subsidiary of the Indian coke manufacturer.
As a side note, Rey has decided that with its strong focus on the Canning, it would be best to either float off or sell off its big ground position in Chile that came with its 2006 float.
Gold is the lureQANTAS flights permitting, a bunch of mining analyst types will this week swap their pinstripe suits for moleskins and descend on the Rover project of Westgold Resources (WGR) to the west of Tennant Creek in the Northern Territory.
Their visit will coincide with latest drill results from Westgold's highly fancied Rover 1 gold/copper prospect.
As noted by Garimpeiro back on March 24 when Westgold was trading at 25.5¢, promising exploration work at Rover 1 by the long-departed Peko was stopped in its tracks more than 25 years ago when Aboriginal groups exercised their veto rights on more work being done.
The property was subsequently picked up by AngloGold, which rated it as its second best behind its Tropicana gold find in Western Australia with Chris Bonwick's Independence Group.
The property was bounced across to Westgold with AngloGold's subsequent culling of its Australian exploration effort, and it's fair to say if it was AngloGold's No. 2 property, it is well and truly Westgold's No. 1.
A drilling program by Westgold kicked off a couple of months ago, with the first holes designed to give some modern-day confirmation to the impressive results generated by Peko, but they are not stock exchange compliant.
Westgold early this month reported that one of the first holes had returned a stylish 65.75-metre intersection grading 11 grams of tonne a gold — along with other metals — from 492 metres. There was also a bonanza-type 15.75-metre intersection that assayed 29.4g/tonne from 541 metres. That's why Westgold shares are now 44.5¢.
Continuous disclosure being what it is, the market will know first if the latest drilling at Rover 1 has again come up with some special results.
Junior joins big leagueTHE junior iron ore sector was a good place to hide last week while the rest of the market was undergoing some serious downward readjustment. Rio Tinto's 85% price increase win for the red stuff made sure of that.
Having said that, junior ain't exactly junior anymore, what with stocks such as Atlas Iron and Brockman Resources now boasting market capitalisations of $1.07 billion and $250 million respectively.
That's why Garimpeiro's interest has picked up in Mike Young's BC Iron (BCI).
After a 5.86% price gain on Friday, the company has a fully diluted market cap of $97 million against which it is holding cash of $9.5 million.
More to the point is that BCI is expected to this week release its scoping study into the initial 3-5 million tonnes-a-year development of its Bonnie Creek iron ore project in the Pilbara. It's in the same neck of the woods as Fortescue's recently commissioned Pilbara operation.
Fortescue boss Andrew Twiggy Forrest is not only Australia's richest man, he also claims to be a champion of open access to the Pilbara's rail and port infrastructure.
Now that he has got both of his own in place in the Pilbara, the memorandum of understanding that BCI has with Fortescue to negotiate an access deal means that Bonnie Creek's location could be a real blessing.
The scoping study is based on the recently announced inferred resource of 28 million tonnes of direct shipping ore. As you would expect at current iron ore prices, the potential bumper cash operating margins it might point to will make interesting reading for a company with a market cap of $97 million.

Source: The Age