Gcm Resources Share Discussion Threads

[mrshaungcm] 09/10/2016 19:59

hxxp://www.daily-sun.com/post/173900/India-keen-to-procure-coal-from-northern-Bangladesh-
“India has shortfall of coal. They cannot meet local requirement,” the junior minister added.There is a high risk for open-pit mining given the potential vulnerability of the vast arable lands in North Bengal that produces a large portion of the country’s granaries, AKM Shamsuddin, an independent consultant, and also a former official of state-owned Petrobangla, told the ministry recently.

[mrshaungcm] 06/10/2016 19:30

gpb can be found on 3i CHL doing what he normally does

[baxtea1] 30/9/2016 22:04

Shaun needs to keep busy searching the press or he will go back to cruising public conveniences again. All part of his therapy

[888icb] 30/9/2016 20:03

I think we should have learnt by now that not much is gained by reading articles in Bangla newspapers.

[legionnaire2] 29/9/2016 10:29

I meant the Bully.
Tks.

[baxtea1] 29/9/2016 10:01

No pun intended:-)

[baxtea1] 29/9/2016 10:00

Will do mate, thanks for digging it up

[thebullyboy] 29/9/2016 10:00

Baxtea1 if ok with you please could you add this evo note link to the header. thanks.

[thebullyboy] 29/9/2016 09:18

Old evo note but worth a read with sensible spectacles on

hxxps://www.scribd.com/document/50775047/GCM-L-GCM-Resources-11-03-11

Investment rationale

There can be little doubt that Phulbari is a significant coal deposit. Therealisation of value from the resource depends on government approval of GCM’s Scheme of Development. We believe that fundamental progresstowards approval has been achieved as the current government has setalleviation of the country’s energy crisis as one of its principal objectives.As the proposed mine and an associated power plant could generate 25% of Bangladesh’s electricity, approval would help the government showprogress on meeting these objectives ahead of elections in late 2013.

The potential

GCM Resources holds mining and exploration licences in northwest Bangladeshwhere a resource of some 572Mt of mixed thermal and semi-soft coking coal hasbeen outlined to date. We believe the thermal portion will find a ready market inBangladesh with any surplus exported to growing Asian markets. Indeed, thestructural shortfall in electricity generation capacity across Bangladesh – which islikely to be exacerbated as demand grows with economic and social developmentand natural gas reserves are depleted – should see increased focus on coal as analternative. There is currently no domestic demand for the semi-soft fraction and sowe expect this will be exported until a local industry develops.Of course, there remain a number of hurdles that need to be jumped ahead of thestart of construction. Not least of these is the company resolving the variousenvironmental and social concerns to the government’s satisfaction. Of these thereare two key elements: resettlement and water management. First, the companyneeds to continue with its work to win local acceptance for its major resettlementprogramme. Second, its proposed quality-enhancing water management systemshave been demonstrated to government and this should also help its case.Looking forwards, a mine producing up to the company’s target of around15Mt/year, of which about 20% could be higher value semi-soft coking coal, standsto generate a significant profit margin over a long mine life. While we take a moreconservative approach to production potential we recognise that there is scope toincrease output and hence the value of the project significantly.

Valuation

We have completed a number of valuations of GCM based on a range of parameters.These show that the group is currently worth around 200p but that it would increaseto 440p on the approval of the Scheme of Development. Longer term, minedevelopment could see the shares increase to over 1200p, and maybe as high as1480p even after allowing for an equity issue to cover part of the construction cost.

Recommendation

While the recognition of value remains dependent on the government of Bangladeshallowing the company to proceed with mine development we believe that this ismainly a matter of timing. Various political factors need to be overcome to achievethis aim – but power shortages in the country are the key driver here and these areonly expected to worsen – putting further pressure on politicians to find a viablesolution. We believe that GCM offers the most obvious of solutions. Buy.

A significant coal resource…̷0;with a known route to production…230;although, as it remains of indeterminate length……the time value of money hasto be considered in valuation...…despite which we believe that there is a binary recommendation outcome…at some stage

Company description

Coal has been known in northwestern Bangladesh for many years but it wasnot until BHP Billiton was granted licences over the area that the economicpotential of the Phulbari deposit became apparent. Following a change of strategy by BHP Billiton in the late 1990s the licences were assigned to thecurrent ownership group. Mine development was subsequently delayed bypolitical changes within Bangladesh. However, we now believe that a periodof stability and increasing power shortages will soon lead to approval of theScheme of Development and start of mine construction.

Historical context

The Phulbari coal deposit was first outlined by BHP Billiton in January 1997. Thisfollowed the completion of gravity and seismic surveys together with a programmeof drilling which confirmed the presence of a Permian age coal deposit. Given otherissues faced by BHP Billiton it decided to divest of a number of non-core assets in1998. This included the licences covering the Phulbari deposit which were assignedto a special-purpose company – Asia Energy Corporation (Bangladesh), now thelocal subsidiary of GCM Resources. The legacy of BHP Billiton ownership is aUS$1.00/t royalty payable, as a result of subsequent corporate transactions, toWestern Coal / Walter Energy.A pre-feasibility study was undertaken in 2000 on the basis of data generated byBHP Billiton and additional geophysical information that had not been available priorto the assignment of the licences. This study concluded that an open pit minecovering the deposit could be economically viable.Subsequently, in 2004, Asia Energy, the ultimate parent of Asia Energy Corporation(Bangladesh) listed on the Alternative Investment Market in London. At the time, thegroup raised about £14m which was spent on a feasibility study incorporating fullenvironmental and social impact assessments and a Scheme of Development. Thiswas submitted to the government in October 2005 and the company subsequentlyraised £32m in order to fund initial development.Unfortunately, political upheaval in Bangladesh led to a suspension of decision-making and the company had to slow progress on the project. This situation remainsin place today, although the electricity supply shortfall within the country has beenexacerbated over the interim period. Alleviation of the energy issues remains a keyplank of the government’s manifesto as described in more detail on page 12.These delays encouraged the company to look further afield and were the reason fora change of name from Asia Energy to Global Coal Management and subsequentlyGCM Resources. The company has also seen a change in senior management sincelisting with the appointment of Gerard Holden as Chairman and, anticipating minedevelopment, Steve Bywater as Chief Executive.Investments in coal projects and companies in other parts of the world generatedprofits and these have enabled GCM to progress the project with additional studiesof the economic potential. In the background, the political situation has eased whilepower supply issues have risen up the political agenda. We believe that this willeventually be the overriding factor which will encourage the government to approvethe Scheme of Development. Moreover, the large number of jobs that will be createdmay garner further support ahead of the next scheduled elections in 2013.
Deposit first outlined by BHP Billiton in 1997……with a pre-feasibility study completed in 2000The company listed on AIM in2004……but political upheaval prevented progressCash invested to ensurelongevity̷0;…and Bangladesh is now movingforwards

Valuation

GCM’s valuation is dependent on the Bangladesh government’s approval of the Scheme of Development for the Phulbari mine. Without this, thecompany has some infrastructure and other assets in the UK andBangladesh together with its current cash and listed investments of around£18m – perhaps worth around 36p/share – plus long-term option value onthe scope for eventual development of the project. Development approvaleffectively exercises that option and we believe, after allowing for asignificant capital raising, could generate a present value of up to US$3bn.

Summary valuation

GCM Resources stands somewhere along the path from a major deposit to a cash-flow generating mine. Given all of the work that has been completed to date – fromgeological, financial and socio-political perspectives – we believe that there is abroad understanding of the potential of the project.Moreover, the political developments in Bangladesh bring additional progress, albeitthat they could still create barriers which could hold up the company’s advance for awhile. Nevertheless, we believe that the underlying energy squeeze in the country,which hinders its economic development, will ultimately encourage the governmentto grant approval for the mine.

On a current basis we believe that the shares are probably fairly valued at theircurrent level. In our view, this represents an option on the overall size of theresource and the potential profitability that could accrue from development.However, the exercise of that option would result in changed input parameters andwe believe that this is looking more likely given the underlying political changes thathave been wrought in the country. In particular, we expect there to be an increasingmove towards development of a power generation alternative to gas given both thedepletion of this fuel within the country and its wider use.Progress on the permitting front would, we believe, have a significant positive effecton GCM’s share price and we believe that it would move towards our 440p targetprice. While these target prices are normally structured on the basis of a 12-monthtime frame, in this instance we believe that timing is too dependent on politicalevents beyond the company’s control to be able to determine the time-line with anydegree of accuracy.As discussed on pages 10 – 12 we believe that some political progress has beenmade and that the end-2013 elections represent a very important trigger. Indeed, adecision in the next few months would probably enable the start of ground worksprior to the elections – implying a significant hiring and investment programme inthe country.

GCM has a broad understandingof the Phulbari project……;and we believe that political progress towards development has been achieved Fairly valued ahead of approval…̷0;but political progress would change the game……and we believe that prospectsare improving

Looking to the longer-term, we believe that there is significant upside potentialbeyond the 440p level. This is even after allowing for the dilutive effects of either ashare issue or a sale of a part of the project to a joint venture partner to help fundthe capital cost of developing the mine. We have looked at this opportunity on twodifferent bases and derive a valuation of 1200-1500p/share. The most importantfactor here is the level of the development fund-raising as this has a direct effect onthe level of dilution incurred.Overall, therefore, while we value GCM at around 200p we set our target price at440p to reflect our view of its future potential. Beyond this, we consider that there issignificant additional upside potential to somewhere between 1200p and 1500p.

[thebullyboy] 29/9/2016 08:47

martinfrench - 14 Mar'11 - 18:28 - 25433 of 25433


Brokers' Notes

Evolution Securities issued a "buy" recommendation for GCM Resources (GCM) with a 440p target price. Given that the London-based resource exploration and development company has the potential to transform electricity generation in Bangladesh, the broker believes the group's scheme of development for its 572Mt JORC compliant coal resource will be approved. This, the broker added, will result in a market uplift in the share price. GCM shares declined 4.125p to 210.875p.

[baxtea1] 29/9/2016 08:24

No, sorry mate, not sure whats wrong with the links on here. I'm sure someone off iii will have it though. Pappi from iii had a good analysis as well, based on more up to date data.

[legionnaire2] 29/9/2016 08:05

Baxtea do you have a link to the Evolution broker note ?
The one on here doesn't work ....

[the stigologist] 28/9/2016 21:18

Management look to be fully engaged with this given recent response to Press Speculation.

Might need to dust off the old Cazenove NPV notes again with NPV estimates of 3000p+

[baxtea1] 28/9/2016 15:14

Nice recovery

[g2theary] 27/9/2016 21:49

*rallying in December 2009

[g2theary] 27/9/2016 21:47

This should be back above 20p Within the next week or two. I remember this talking in December 2009... They are much further at this point... Imo £1 plus within the next 6 months.

[mrshaungcm] 27/9/2016 19:02

on off on off
wtf is going on LOL

[888icb] 27/9/2016 17:45

Some good buys going through after the RNS with the last trade at 16.6 which is a 19% rise.