Atrum Coal's EGM in Sydney:
Ash & Hot Air
Issue 168, September 2016
Investors in ASX-listed Atrum Coal will vote on its future this week at an EGM in Sydney, as the company quietly shelves its giant Groundhog anthracite project in British Columbia, which sources advising the company say is flawed, hyped and dependent on lab tests in China.
Atrum's co-founders have spent three years promoting Groundhog as the world's largest undeveloped anthracite deposit. They listed the business in Australia in 2013 and the shares rocketed, from 20 cents to two dollars, as Atrum drilled-out a multi-billion tonne coal resource.
The company was hailed a “great success story” by The Australian and Atrum was the best performing mining stock of 2013. First coal, co-founder Russell Moran told Global Mining Observer, would be shipped from Canada's Port Stewart in September 2014. The company announced a string of non-binding off-take agreements and even hinted at a dividend policy.
Years later and the coal remains in the ground, even as Atrum's market cap continues to hover around A$164m ($126m). Legal battles have dogged the company, after its co-founders fell out over personal loans. But analysts say that Groundhog has a critical flaw: its coal ash levels, key to Groundhog's viability, make it a non-starter, explaining Atrum's infighting and long delays.
Last year, Atrum issued a 17-page press release, titled “Anthracite market continues to outperform”. Bulk sampling, marking the first extraction of coal, was on track for the second half of 2015, management said, a deadline that has been widely missed. The announcement focused on buoyant anthracite prices. It also said that Groudhog's overall ash levels were in the region of 2 to 15 per cent. Production, however, will focus on two main coal seams, “Discovery B” and “Duke E”, where ash levels are 22 to 28 per cent, way above industry norms.
Global Mining Observer gave the coal specs blind to senior bosses in coal, asking if the project was viable. It “looks tough”, they said, though they instantly recognised the asset as Groundhog, because its problems are well known. Sources advising the company say Atrum has made “a lot of mistakes” in over-egging expectations, but that board member James Chisholm is trying to steer the company in a new direction, appointing a new chairman, Bob Bell, a coal veteran from Canada-based Teck.
Atrum has also bought shares in Atlantic Coal, an unlisted anthracite producer in Pennsylvania. Atrum's investors will vote on the deal on Thursday. Sources say it is the first move towards a full merger, sidelining Groundhog, in favour of Atlantic's Stockton colliery.
Russell Moran maintains that Groundhog has “world class potential”. He is expected to vote in favour of the deal with Atlantic, but says he is “busy building” a new lithium vehicle in Canada, MetalsTech, which is being prepped for an IPO. Its asset is “literally a few hundred metres” from an existing lithium site, Moran says. Investor interest “has been overwhelming.” Following Atrum's model precisely, insiders intend to hold onto a large percentage of MetalsTech's stock. They plan to “drill out” the deposit “and aggressively move down the path of feasibility.”
Atrum, meanwhile, is planning to send coal samples off to China, according to insiders, to check on coal quality. “No one in their right mind will accept Chinese assays.”
Atrum's shares last traded at 82 cents.
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