Cokal, a coking coal mine developer in Indonesia, has been classified as a Phase I company and rated '2' on the five point PortfolioDirect rating scale where a...

Cokal, a coking coal mine developer in Indonesia, has been classified as a Phase I company and rated '2' on the five point PortfolioDirect rating scale where a '5' rating is the lowest risk category. The company is awaiting a potentially imminent regulatory approval critical to the development of the project and a funding pre-condition. Financiers are likely to be more demanding both in terms of the charge for their capital as well as requirements for equity holders to contribute more than had been anticipated. A larger than previously expected funding package is likely to erode most if not all of the operating margin at current low coal prices. The value proposition, even in the event of an almost immediate government approval, could prove only just sufficient to validate the current share price. Upon the beginnings of the next cycle when coal prices begin to rise, Cokal will offer significant leverage as a pure play. Trading opportunities may coincide with regulatory approvals. The PortfolioDirect report is available through Bloomberg.