36

Patersons Resources Review - May 2012

Cokal Limited CKA ($0.33)

Recommendation: BUY

Slow progress
OUR VIEW

Analyst: Andrew Harrington, Matthew Trivett

Information from Cokals (CKA) primary exploration project, Bumi Barito Mineral (BBM), in Central Kalimantan has been pretty slow since the maiden resource was dened in December 2011. This has been due to the consistent rain, which is normal for this time of the year, and only being able to use small manually portable drill rigs. The small rigs need to be used because CKA has not received the forestry exploration permit over BBM. Once the permit is granted tracks can be cleared and larger track mounted rigs can be used. Despite the slow drilling progress crews have been out completing surface exploration work on BBM as well as CKAs other Central Kalimantan tenements. CKA has also been expanding its footprint in Indonesia, acquiring 3 tenements in West Kalimantan and progressing infrastructure. Our CKA price target only reects BBM production of 2.4Mtpa and we believe that this has upside potential once feasibility studies on BBM and infrastructure in Murung Raya are completed and other projects are advanced. We have applied a country risk factor of 25% on the BBM project (0.75x NAV) and pushed our start date back one quarter to Q1 CY2014. This has reduced our price target to $0.65/share.

Investment Highlights

Investment Summary
Year End June 30 Reported NPAT ($m) Recurrent NPAT ($m) Recurrent EPS (cents) EPS Growth (%) PER (x) EBITDA ($m) EV/EBITDA (x) Capex ($m) Free Cashow FCFPS (cents) PFCF (x) DPS (cents) Yield (%) Franking (%) 2011A (2.6) (2.6) (0.7) na (47.9) (2.6) (41.5) 0.0 (25.7) (6.7) (4.9) 0.0 0.0 100.0 2012F (6.4) (6.4) (1.4) na (23.8) (6.3) (19.4) 0.0 (20.1) (4.4) (7.6) 0.0 0.0 100.0 2013F (8.2) (8.2) (1.8) na (18.7) (7.4) (23.3) 30.6 (48.4) (10.5) (3.1) 0.0 0.0 100.0 2014F (2.4) (2.4) (0.5) na (63.8) 6.4 37.6 59.8 (70.2) (15.2) (2.2) 0.0 0.0 100.0

Bumi Barito Mineral (BBM). CKAs maiden resource was dened on BBM late last year. Since then it has been tough going for the drill crews, hampered by consistent rainfall throughout the wet season (January-March). CKA is also waiting for its forestry exploration permit. The introduction of the clean and clear requirement on permits has prolonged the process. Clean and clear status shows that the mining areas have complete documents and no overlapping areas. CKA believe that all requirements for this permit are now satised. Exploration ramp up. The exploration to date on BBM has been done by small manually transported drill rigs. This is difcult and time consuming. In addition to the drilling CKA have had exploration crews out mapping surface geology uncovering coal outcrops throughout the tenement. Once the forestry exploration permit is granted, exploration tracks can be cleared and larger track mounted rigs can be used. CKA has plant ready to be utilised once the permit is granted and we believe that better equipment, easier access and the greater understanding of the geology will result in an increase in the information ow of the coal contained in BBM and an increase to the JORC compliant resource. Infrastructure developments. CKA has progressed plans for coal export infrastructure for its Central Kalimantan tenements. MoUs have been signed with the regency of Murung Raya to develop two ports and two small scale coal red power stations. CKA is developing the infrastructure with the Regency Governments Development Corporation. This will benet the community and place CKA in an ideal place to supply infrastructure solutions to other mines to be developed in the area, including the BHP Adaro Juloi project. West Kalimantan. CKA completed the acquisition of 75.2% of PT Silangkop Nusa Raya (SNR), which holds three exploration licences in West Kalimantan near the Malaysian border. The SNR Licenses cover an area of approximately 13,000 hectares and while little work has been done recently, a review of the geological records of the area found that work done by a major Japanese coal company had identied coking coal bearing formations close to the western border of SNR. Analysis surfaces samples taken from weathered outcropping coal seams from areas surrounding SNR indicate the coal has metallurgical qualities and CKA believes that these outcropping seams continue into SNR.

Company Statistics & Performance

Shares on issue (m) 411.0 Market Cap. ($m) 135.6 52 week range $0.34-$0.80 3mth ADT ($m) Debt est ($m) Cash est ($m) 0.37 0.0 28.7

1.00

3000 2500 2000 Volume ('000)

0.80 Share Price (A$)

0.60 1500 0.40 1000 0.20 500 0 12 Months

0.00

All information and advice is condential and for the private information of the person to whom it is provided and is provided without any responsibility or liability on any account whatsoever on the part of this rm or any member or employee thereof.

Patersons Resources Review - May 2012

Cokal Limited
Valuation Bumi Barito Mineral FX Hedging Corporate Unpaid Capital Cash Debt NAV Price Target (0.75x NAV) Summary of Assets A$m 399.4 0.0 (35.3) 6.6 28.7 0.0 399.5

37
$0.33
A$/sh 0.87 0.00 (0.08) 0.01 0.06 0.00 0.87 0.65 Commodity Assumptions 2011A

Year End June 30

2012F 1.04 303 228 233 123 49 2012F 2013F 1.03 211 153 158 98 50 2013F 2014F 1.00 176 123 128 88 51 2014F

US$/A$ 0.9869 Hard Coking Coal 248.75 Semi-soft Coking Coal 182.50 PCI 195.00 Export Thermal Coal 106.00 Domestic Thermal Coal (A$/t) 45.39 Production Summary 2011A

Attributable Saleable Coal Production Bumi Barito Mineral (kt) FOB costs (US$/t) Price Received (US$/t) All Mines (Kt) Cash costs (US$/t) Price Received (US$/t) Prot & Loss (A$m) Sales Revenue Other Income Operating Costs Exploration Exp. Corporate/Admin EBITDA Depn & Amort EBIT Interest Operating Prot Tax expense Abnormals + Minorities NPAT Normalised NPAT Cash Flow (A$m) Adjusted Net Prot + Interest/Tax/Expl Exp - Interest/Tax/Expl Inc + Depn/Amort +/- Other (Associates) Operating Cashow - Capex (+asset sales) - Working Capital Increase Free Cashow - Dividends (ords & pref) + Equity raised + Debt drawdown (repaid) Net Change in Cash Cash at End Period Net Cash/(Debt) Balance Sheet (A$m) Cash Total Assets Total Debt Total Liabilities Shareholders Funds Ratios Net Debt/Equity (%) Interest Cover (x) Return on Equity (%) 2011A 0.0 0.6 0.0 0.0 3.2 (2.6) 0.0 (2.6) 0.0 (2.6) 0.0 0.0 (2.6) (2.6) 2011A 2012F 0.0 1.1 0.0 1.8 5.6 (6.3) 0.1 (6.4) 0.0 (6.4) 0.0 0.0 (6.4) (6.4) 2012F 2013F 0.0 1.1 0.0 2.4 6.1 (7.4) 0.0 (7.4) 0.7 (8.2) 0.0 0.0 (8.2) (8.2) 2013F 264 89.05 149.25 264 89.05 149.25 2014F 39.6 0.2 23.6 3.5 6.2 6.4 0.9 5.6 8.0 (2.4) 0.0 0.0 (2.4) (2.4) 2014F

Bumi Barito Mineral 100%

Coal Production Summary

1,400 1,200 1,000
(kt)

200.00 160.00
(US$/t)

800 600 400 200 2012F 2013F 2014F 2015F 2016F 2017F 2018F 2019F 2020F 2021F 0

120.00 80.00 40.00 0.00

Cash costs (US$/t) Price Received (US$/t) All Mines (Kt)

Resources 100% Basis (Mt) Mine Bumi Barito Mineral Other Indonesian Assets Tanzania Mozambique Resources Directors Name Mr Peter Lynch Mr Pat Hanna Mr Jim Middleton Mr Domenic Martino Mr Duncan Cornish Mr Chris Turvey Signicant Shareholders Peter Lynch Domenic & Sandra Martino Blackrock Group Patrick Hanna Norges Bank Passport Capital Jim Middleton Position Executive Chairman Executive Director Managing Director Non Executive Director CFO & Company Secretary Exploration & Resource Manager Shares (m) 55.0 37.0 31.6 25.0 17.8 14.5 10.0 % 13.4 9.0 7.7 6.1 4.3 3.5 2.4 M&I Inferred 60 0 0 0 Total 60 0 0 0 60

(2.6) (6.4) (8.2) (2.4) 0.0 1.8 3.2 11.5 14.7 15.2 12.9 20.4 0.0 0.1 0.0 0.9 (8.3) (0.4) 0.0 0.0 (25.7) (20.1) (17.8) (10.4) 0.0 0.0 30.6 59.8 0.0 0.0 0.0 0.0 (25.7) (20.1) (48.4) (70.2) 0.0 0.0 0.0 0.0 31.3 31.6 0.0 0.0 0.0 0.0 30.6 57.9 5.6 11.5 (17.8) (12.3) 17.2 28.7 10.9 (1.4) 17.2 28.7 (19.7) (90.0) 2011A 17.2 44.8 0.0 8.6 36.2 na na na 2012F 28.7 61.7 0.0 0.2 61.4 na na na 2013F 10.9 84.0 30.6 30.8 53.3 37.1 na na 2014F (1.4) 153.1 88.5 102.2 50.9 176.8 0.7 na

All information and advice is condential and for the private information of the person to whom it is provided and is provided without any responsibility or liability on any account whatsoever on the part of this rm or any member or employee thereof.