PORT STEWART, 150kms from Atrum Coal's 1.57bn tonne Groundhog anthracite deposit in British Columbia. Photograph: Atrum Coal

PORT STEWART, 150kms from Atrum Coal's 1.57bn tonne Groundhog anthracite deposit in British Columbia. Photograph: Atrum Coal

Atrum Coal: Margins Beat Tonnage But Atrum Coal Has Both

Issue 46, June 2013

When Atrum Coal listed in July last year, Groundhog was one of four coking coal targets the company’s Perth based founders had assembled in British Columbia. “It was the first project we drilled out,” says co-founder Russell Moran. “It seems to be the largest anthracite deposit in the world.”

The company has outlined a 1.57bn tonne anthracite resource, the clotted cream of the coal world. “It's almost not like coal. It’s a bit more like graphite. Washed and processed the carbon content goes all the way up to 95 plus per cent.”

Coking coal is typically 60 to 80 per cent carbon, compared to sub-50 for thermal coal. The higher its carbon content, the hotter coal burns and the higher its price.

“We’re not about the tonnage. Our business model is built on a high value product and being able to produce at a low cost. That’s how you make money. It’s not rocket science.” 415m tonnes of the JORC resource is less than 100m from surface. A rail easement runs over the property, connecting to the Port of Prince Rupert.

Alternatively, Groundhog is 150km from Port Stewart, which high margins put within truckable distance, lowering capital costs. “We’re all about generating early cash flow on very low capital entry. An expanded production profile might require further cap-ex, but it's an expansion built on existing cash flow, as opposed to going out bigger than Ben-Hur and trying to build a billion dollar mine.”

Moran and chairman James Chisholm own 46 per cent of the stock. “We supported the company on market in the first couple of days of trading.” It is support that has been rewarded: shares have risen from A$0.20 to A$0.75, valuing Atrum at A$102m ($97m).

Moran likens it to a US-style Mom-and-Pop business: using cash reserves, proceeds from warrants, conventional debt, contractor financing and a wash plant lease, Atrum aims to hit production without any further dilution. “By September next year, we’re targeting to have two Handymax vessels full of our valuable anthracite coal.”

As Groundhog moves to feasibility, Moran, whose background is in corporate finance, plans to brush-up Atrum’s other projects for possible divestment. “We know exactly what an asset needs to look like in a due dilligence room. That’s the strength we bring.”

“That’s how you make money. It’s not rocket science.”

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