AMN - SOUTH AFRICA: Growing interest in Acacia

There has been strong investor interest in Acacia Coal on the back of its exclusive right to purchase the Riversdale Anthracite Colliery (RAC) in South Africa. The deal will see the original asset of Riversdale Mining reunited with Riversdale’s original management team.

Highly regarded analyst Pieter Bruinstroop, of equity research firm Beer & Co, values Acacia shares almost three times their current price in the first research report published on the newly ASX-listed coal company.

The report values Acacia shares at 1.5c. They are currently trading at 0.5c, giving the company a market capitalisation of just $8 million.

Pieter Bruinstroop says Acacia shares are a ‘strong buy’ on the back of the Riversdale deal.

He points out that the original management of Riversdale left the company once the now-famous Mozambique coal project became its primary focus.

“Following Rio’s acquisition and then exit from Riversdale, the RAC project was ‘lost’,” he says.

“The original management, which had come from Rio, reached agreement to acquire RAC from Rio and then to vend it into Acacia.”

South Africa uses more than two million tonnes of anthracite a year in the production of ferro-chrome, ferro-manganese and titaniferous slag.

“While supply is currently adequate, it is projected to fall significantly, especially for higher quality anthracites, due to resource depletion,” Bruinstroop says.

The RAC has a total JORC coal resource of 8.1 million tonnes. In its recent pre-feasibility study, Acacia forecast annual production of 520,000 tonnes.

The total capital cost is put at just A$24.4 million, thanks in part to the outsourcing of the processing plant and some mining.

“The management of Acacia is very familiar with this project, having managed the project previously, and, given their history with managing similar operations, investors can be confident in project delivery,” Bruinstroop says.

www.acaciacoal.com.au