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The right resource at the right time

THE outlook for this aspiring coking coal producer has not been lost on investors, with its stock being a standout performer on the Australian bourse this year. <b>By Blake Wilshaw - <i>RESOURCESTOCKS</i>*</b>

MiningNews.Net
The right resource at the right time

The rise of Carabella Resources can be attributed to a combination of factors.

Exposure to an in-demand commodity, strong resource growth, the right location, near-term exploration upside and a little bit of help from the weather gods have all had an impact.

The flagship asset for this Queensland-based explorer is Grosvenor West, located in the Mabbin Creek tenement.

"We are an emerging coking coal development company that has a large Queensland tenement holding, with the potential for a number of projects on the same lease," chief operating officer David Begley said.

"This will provide synergies and cost reductions if we can prove them to production.

"Our strategy is to fast-track development of Grosvenor West to production and there's also further exploration upside at Mabbin Creek."

The company debuted on the Australian Securities Exchange in December 2010 and the pre-IPO announcement of a maiden 91.7 million tonnes coking coal resource made the market pay attention.

Carabella stock rocketed, pushing to a high of $3.01. Not bad for a company which floated at 40c.

Since then, Carabella has been trading around the $2 mark. Keeping the price buoyant since December has been a stream of strong results and positive exploration updates.

Along with the initial 91.7Mt resource, Carabella identified an exploration target of 30-45Mt.

Company management, who have worked with a number of major global coal companies including Anglo Coal, Shell Coal, Vale and Rio Tinto, believe numerous factors have helped sustain support for Carabella.

"Getting a 92 million tonne JORC resource prior to the IPO has been a driver for interest in the company," Begley said.

"Our listing and exploration updates have coincided with coking coal supply shortages in the market, due to weather conditions in Australia and continued large demand from Asia.

"Steel mills and coal traders are looking at the short-to-long-term demands and see that the fundamentals have changed."

To drive the stock and maintain these levels of interest, Begley said the company was focused on delivery of exploration benchmarks and reaching logistics and infrastructure targets.

"We have experienced investors who have been regularly informed and support the share price," he said.

The near-92Mt resource was recently bumped up to 95.3Mt, with 13.6 Mt measured and 18.5Mt indicated.

Drilling for the 35-40Mt upside target is now 50% complete, with two additional rigs and a dedicated coring program at Grosvenor West to finish the program by the end of the year.

Executive manager, technical services and planning Bruce Robertson, a veteran of Anglo Coal, said results to date had been in line with resource-modelling predictions.

"It's anticipated that this drilling program for Grosvenor West will be completed by November, two months ahead of the original planned date," he said.

"This should minimise the impact of another wet season on critical drilling activities for the development schedule."

Further afield, in the broader Mabbin Creek exploration permit, remote sensing analysis and previous drilling reports have identified several areas, which Carabella is now assessing after a 2D seismic survey and is implementing follow-up scout drilling.

Concurrently, Carabella is working towards completion of a concept study for Grosvenor West, which will be completed by 2012.

So the timeframe to production is as follows:

a bankable feasibility study, engineering studies and completion of infill drilling at Grosvenor West is scheduled for 2012;

coal marketing studies and an environmental impact assessment will be delivered in early 2013;

construction and mine development from 2013 to early 2015;

ramp up through 2015; and

production of 3-5Mt per annum of clean hard coking coal, most likely from an open-pit mine.

Begley said there was also the ever-important matter of "sourcing infrastructure in a very congested market"

All signs look positive for such plans at the moment, given the project's close proximity to existing operating mines, as well as rail, road and power infrastructure.

The project is located adjacent to the Goonyella North, Goonyella Riverside complex, Grosvenor and Moranbah North coking coal mines, and northeast of the Rugby coal deposit.

Together, these mines represent about 2.4 billion tonnes of JORC coking and thermal coal resources and deposits.

"Their total existing and planned production is in excess of 26 million tonnes per annum - which is a pretty good indicator of what is out there," Begley said.

The project's eastern boundary is also situated within 3km of each of the Goonyella, Riverside and Moranbah North rail loops, while the Dalrymple Bay coal terminal is just 197km away.

"We're also situated approximately 238 kilometres from the Abbott Point Coal Terminal via the Northern Missing Link rail line, which is under construction at the moment," Begley said.

Carabella has lodged an initial expression of interest to secure port requirements at the proposed Abbot Point Terminal 4 multi-user facility and at Dudgeon Point.

The company has already secured initial workers' accommodation in the town of Clermont.

Carabella is a rare find on the ASX, where there are few coking coal juniors. There are even fewer this advanced.

"Coking coal is very scarce because of the massive demand of steel mills all around the world, diminishing supply and people trying to secure resources for the future," Begley said.

Surrounded by large operators, he acknowledged that Carabella could easily find itself as a takeover target.

"But we are focused on what we can control, which is the exploration and other areas of value creation for shareholders," Begley said.

"We look forward to achieving further milestones and continuing to deliver value to our shareholders over the long term."

*A version of this report, first published in the October 2011 edition of RESOURCESTOCKS magazine, was commissioned by Carabella Resources

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