Coal explorer Bandanna Energy (ASX: BND) has the potential to be a significant player in the Australian coal sector with one of the largest thermal coal inventories of any ASX listed coal explorer.
BND is currently in transition phase from coal explorer/developer to coal producer and it has coal resources in two Queensland basins – the Galilee and Bowen. Central Queensland is a world-rank producer and exporter of black coal and The Bowen Basin is the principal coal producing basin in Queensland with significant rail and port infrastructure.
While still some way off from actually producing coal, BND may show further upgrades to its resources in 2012 as drilling progresses.
First production of coal is expected in the year ending 30 June 2014 (FY14) and forecasts show that BND could be producing 5 million tones per annum (Mtpa) by FY16 and over 10Mtpa by FY18, with profitability expected in FY14.
The termination of its Strategic Review Process saw BND sell off heavily in August 2011, and it will now focus on coal exploration and development. BND is in discussions with a number of parties, particularly regarding Joint Venture participation in its Bowen Basin projects, and the outcome of these discussions are expected to lead to additional funding.
BND could undergo significant growth in the coming years, and Analysts’ have a 12 month price target of $1.80 on the stock.
BND is the only ASX listed company with significant coal development plans in the Galilee Basin, but it is not suitable for conservative investors.
M&A activity in the coal sector remains, and there’s every reason to believe that BND may be an attractive target.
Status: SPECULATIVE BUY
BND’s shares today traded at 78c
For portfolio, sharemarket and fixed income enquires contact: Dan Stratful at Investment Research Group (IRG) Authorised Financial Adviser (AFA) 0800 437 8489, 09 304 0232, dan.stratful@irg.co.nz **A disclosure statement is available, on request and free of charge.
Disclosure: BND
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