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Bowen Coking Coal (BCB) bear case

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    Bowen Coking Coal (BCB) bear case

    Hi James and team. Thanks again for your continued efforts to make sense of the market - it truly is a comfort having someone on the inside helping out. One of my most painful trades at the moment is BCB - I understand the issues around transport and pricing and the deferred royalty owed the Qld govt, but what else am I missing? Their recent qtrly report looked decent enough and they appear cash flow positive but it feels like the market are expecting another capital raise or are positioned for prices to decline, or something else that I just can't see. Any thoughts on what the bear case for BCB is at the moment and why the market appears so negative? Cheers Craig

    Answer

    Hi Craig,

    A painful trade for us both. The bear case on Bowen Coking Coal (BCB) is cash constraints as well as continuing operational issues. At full tilt, their Burton complex will generate enough cash to cover interest payments, royalties and capex on top of working capital requirements. The issue is that Bowen has struggled to go at full tilt for an extended period of time.

    The latest quarterly was good. Positive cashflow and a good run rate of production and sales which highlights the upside here. If there are further operational issues, another cap raise wouldn’t surprise, though we expect management to be doing everything in their power to avoid that outcome.

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    Bowen Coking Coal (BCB)
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