buy cdn now its at the start of a bull in china!

Pretty heavy volume but only a small spike up today.

sorry wrong thread.

Positivley out of the blocks this morning.

Gets a good write up in this Broker note. Check the last few pages.

http://www.minesite.com/fileadmin/content/pdfs/Brokers_Reports_5/juniorminingpaydirt290607.pdf

Thanks gf.

Good write up across the road on the AGM.

Lifted from the TMF board...





EGM 5 July 2007

Location Lacon House, central London (head office of CDN's lawyers Nabarros)
Logistics no problems gaining entry
Attendees 3 private investors, several advisers, the CDN Board minus Mark Trevan and Paul Ingram, both executive directors
Food & drink wonderful petit biscuits & water
Odds on getting a chance to speak to someone of the opposite sex fair, the three smiling receptionists, who were more than happy to discuss Nabarro's new logo, plus a female lawyer was present.

Background

Domiciled in the UK since 2003, the company [CDN] was formed for the purposes of exploring precious metals in China.

However 2006 marked an exciting year when the company transformed from gold explorer to coal producer following the acquisition of the Cook Colliery and related mining operations in Australia, from Xstrata Coal Pty Ltd.

Since then the Company has acquired the adjacent Minyango project, an area situated in a region of strategic importance within the Bowen Basin, surrounded by some of Queensland's premier coking and thermal coal mining operations.

The Company is now primarily focused on mining coking coal in Queensland.

http://www.caledonresources.com/WebForms/Home.aspx

The C-word

I have only been a shareholder in CDN for three months, I have little interest, correction no interest, in the fun and games experienced by CDN in China. It is fair to say that China remains at the forefront of several private investors, as evidenced by the Caledon thread on ADVFN, and as evidenced by comments after the meeting see below.

A few facts

The Cook Coal Mine:

- Is estimated to contain 40mt of recoverable coking and thermal coal representing 17mt of reserve and 23mt of resource.
- Is expected to produce 1.8Mt of coking and thermal coal by 2009.

The Minjango exploration project is estimated to contain at least 240mt of coal (JORC) of which 75mt is indicated and 165mt is inferred.

Cook Mine was acquired from Xstrata in June 2006.

Question - so why did Xstrata sell Cook Mine to CDN?

Answer Xstrata is mining 30mt per annum of coal in Queensland, Cook Mine, producing less than 500k of coal per annum fell off the 'radar screen'. Plus it is a 'tired old lady' that suffers from gas.

Peter the extroverted engineer

One never knows what to expect at AGMs, the same sentiment applies with regard to EGMs. EGMs can last less than five minutes. Yesterday's CDN EGM lasted less than five minutes, but afterwards Peter Seear gave a very upbeat and impressive presentation.

Peter's CV:

- 54 years old.
- Actively engaged in the coal mining industry since 1977.
- Qualified as a chartered engineer in 1983.
- PMD degree from Harvard School of Mining.
- COO at CDN, appointed in 2006.

Bottom line - Peter is extremely enthusiastic about the Cook Mine project.

Further good news he is giving the same presentation to institutions in the City over the next couple of days.

Key points from the presentation

Cook Mine is in the 15th week of production.

Coal is currently being produced by the use of continuous bolter/miners (two modern hired ABM20's from the Austrian-manufacturer Voest-Alpine) with shuttle car transportation of coal to a conveyor belt and from there to the surface.

Delays in equipment arriving and reliability has meant a longer and more costly build up to production than originally envisaged. CDN (PS) estimates that these problems have set production back by approximately six to eight weeks.

CDN is now hitting targets, in the 15th week of production.

CDN's USP/bid for glory: After the initial phase, the Cook Mine will have the benefit of a continuous bolter/miner and a continuous haulage conveyor system. As demonstrated in South Africa, USA and Canada continuous bolter/miner paired with continuous haulage conveyor systems working as one operational unit can achieve impressive production rates in excess of 1mtpa. Note 'one operational unit', when in full operation, CDN expects more than one operational unit working at Cook.

Add to the equation a new 'state of the art Voest-Alpine ABM25 Bolter/Miner shipped in early July and which is expected to be in service in mid-September. Please believe me, Peter can get very excited about the ABM25 (it takes the ABM20 40 minutes to advance 2 metres, it takes the ABM25 only 12 minutes).

The first shipment of the Flexiveyor continuous haulage components has arrived on site (circa 90% of the components), assembly is planned for completion through August 2007. Engineers from Canada and South Africa will be on site in this period to assemble and surface test the unit prior to operator training.

An eight-car Flexiveyor continuous haulage system is working quite happily at a Potash plant. From listening to the Minesite presentation, I think CDN will be operating a 16-car continuous haulage system.

What CDN has to do is demonstrate that technology currently used in a non-combustible environment (potash does not combust) can be used in a combustible environment (coal can combust). Peter is confident that CDN can demonstrate that this is the case.

A brief interlude

On 20 November 2006 CDN announced a third acquisition [the other two being Cook and Minyango]. This acquisition concerns the purchase by Caledon Coal Pty Ltd ('Caledon Coal') of the entire issued share capital of Mining Technology Partnerships Pty Ltd ('MTP'), for a total maximum consideration of A$8.5 million. MTP is expected to become the exclusive representative in Australia, New Zealand and Indonesia of Magatar, the licensee of certain intellectual property rights for a coal mining technology which is the mining method to be utilised in the Cook Mine and potentially the Minyango Deposit.

http://www.investegate.co.uk/Article.aspx?id=200611200730043245M

Peter Seear had an interest in the business conducted by MTP.

Magatar?

The second phase of production at Cook will use a patented system called Magatar, this involves a partial-extraction mining method, utilising a custom-built continuous-mining unit coupled with a Flexiveyor/Prairie continuous conveyor system. This set-up is expected to provide the necessary flexibility required to exploit the resource effectively.

Magatar is a patented system, the agency rights to which are held by MTP in Australia. Caledon believes the system can achieve significantly higher productivity rates than the conventional continuous miner-shuttle car system employed at Cook to date.

It is interesting when looking at the Magatar website, the Cook Mine project is specifically mentioned:

http://www.magatar.com/projects.htm

Magatar is currently busy introducing it's LCM [Linear Continuous Mining] methodology at Cook Colliery in Queensland Australia. Cook Colliery has recently been purchased by Caledon from Xstrata Coal and will be the first mine in Australia to employ Magatar's LCM methodology. Full production mining will commence in September 2007 after delivery and commissioning of the major mining machinery from Austria and Canada.

Clearly Magatar has a lot riding on the success of its patented system at Cook.

Talking of motivation.

Carrot

On 23 April 2007, CDN announced: that it has settled an amount of A$1.5 million, being part of the aggregate consideration due to the vendors of MTP, by the issue to MTP of 1,763,046 new ordinary shares of 0.5p each in the Company ('Ordinary Shares'), at a price of 35.45 pence per share.

1,763,046 new Ordinary Shares were allotted on 18 April 2007 equally to the vendors of MTP, Peter Seear (a director of the Company) and Suzanne Seear (as Trustee of the Seear Family Trust).

As a result, Peter Seear has acquired 881,523 Ordinary Shares (representing 0.57% of the enlarged issued share capital, and is now interested in a total of 4,243,189 Ordinary Shares (representing 2.75% of the enlarged issued share capital).

http://www.investegate.co.uk/Article.aspx?id=200704231133583299V

Back to the presentation

Personnel: A full operations crew of 90 people have now been employed, inducted and trained on site. This is a major milestone and verifies the management's confidence in being able to attract a skilled and competitive workforce in the face of stiff competition from a booming mining industry.

http://www.investegate.co.uk/Article.aspx?id=200706130700502549Y

At the presentation Peter said that recruitment had not been an issue, miners had come to Peter and the rest of management wanting to know more about the proposed production plans at Cook. As a result of what Peter and the rest of management are able to say that there is a waiting list of operators who want to join CDN.

Water: conservation program has resulted in a number of water saving measures being implemented. Such measures include working with the surface land owners to install water saving troughs and capturing water run off from the wash plant. Additional water saving measures will be introduced in July with the implementation of water re-circulation equipment to the bolter miners.

Port & rail: new twin track section to the Blackwater corridor. Cook coal is exported via the port of Gladstone which is the least affected of the major coal terminals with regard to capacity constraints. Following implementation of the current planned expansions, Queensland Rail estimates that rail capacity to the Gladstone Port will increase to 73mtpa by August 2008 at which time it will match the port. The port exported 45mt in the year ended 30 June 2006.

Gas: a further drilling programme of 14 holes has been undertaken on the Cook leases to facilitate detailed mine planning and upgrading of reserve calculations. Early results from this work confirmed that there are no major gas issues. Peter emphasised this point during the presentation.

Size: the drilling programme at Cook is likely to result in an upgrade of the resource estimate.

Conclusion: the 'tired old lady' does not suffer from gas, and should be more than willing to produce 1.8mt per annum of coking and thermal coal by 2009, next landmark will be 100k tonnes per month, hopefully by the end of 2007.

Prices: As 2007 has progressed, the coking coal market has tightened due to rail and port constraints in Australia, combined with increasing demand from India and China; this demand is putting upward pressure on prices as customers compete for the limited volume of coal that is not already committed to customers under annual contracts. Whilst it is more than six months away from the annual industry negotiating season, a number of analysts are now forecasting a significant recovery in 2008 contract prices.

http://www.investegate.co.uk/Article.aspx?id=200706130700502549Y

Per the 2006 annual accounts: Japan is the largest and Korea the second largest importer of coking coal. Rapid industrial growth in China has resulted in China actively decreasing coal exports to feed internal consumption. As a result China is anticipated to become a net importer of coking coal in 2007 (China exported 5.6mt in 2005 CDN estimates). India is also seeking to secure future supplies of coking coal and Indian companies are actively seeking coking coal assets in Australia to supply rapid steel production growth.

For the contract year beginning in April 2007, coking coal prices fell by approximately US$20/t (to the mid US$90's) for the premium brands and often more than that for the lower quality coals. While it is more than six months away from the annual negotiating season, many analysts are now forecasting a significant recovery in 2008 contract prices.

Costs: CDN have quoted US$57/t as the total mine operating costs (SRK report in the re-listing document). Per the Minesite presentation in February 2007, mining costs expected to fall from circa US$25/t to circa US$20/t, in other words total mine operating costs should be US$52/t, in fact possibly lower if the placing see below allow CDN to make further efficiencies to operations.

Based on the recent drilling results undertaken by Caledon, the total Indicated and Inferred Coal Resource in the Aries and Pollux seams are estimated at 240mt with less than 350 metres of overburden cover to the basal seam (Pollux).

Minyango

Minyango was not mentioned at Yesterday's presentation. Suffice to say:

JORC compliant resources:

Indicated 75Mt
Inferred 165Mt

SRK further reports, on a preliminary basis, that the coal quality analyses indicate the potential for three types of coal products to be produced in Minyango:

- A good coking coal and an export thermal coal
- An export thermal coal for a 100% raw product yield
- A semi-soft coking coal for an 85% to 90% yield

http://www.investegate.co.uk/Article.aspx?id=200703140700589029S

The total staged purchase price of Minyango is $US31.5m, staggered over 12 to 15 months, of which at least $US7.2m may be paid in Caledon stock, at Caledon's election.

From the Minesite February 2007 presentation.

In accordance with the Minyango acquisition agreement, the Company settled the second instalment of A$9.6M by the issue of 12,546,175 new ordinary shares of 0.5p each in the Company to Watami Trading Ltd based on the average closing price during the 30 days preceding the election, and amounting to 31.31p.

http://www.investegate.co.uk/Article.aspx?id=200703301505401218U

As a result, Watami Trading is the largest shareholder.

Cook and Minyango synergies

- Established production: Cook Mine 1.8Mtpa planned production (SRK CPR), 20 year mine life
- Upside and growth: Minyango Project management believes that the project is potentially capable of production within a relatively short period, up to 2Mtpa, 20 year mine life
- Synergies: Cook and Minyango are separated by 30 kilometres (15 km to the wash plant) and might share processing and transportation infrastructure

From the Minesite February 2007 presentation.

The X-Factor

Re-call that Xstrata sold the Cook Mine to CDN. Salient details:

- Asset purchase from Xstrata: $US 34.2m
- Fully operational mine and access to a coal washplant, fully permitted tailings site, haulage road and rail access, water allocation

As part of the agreement the following was agreed:

- Xstrata to market 100% of CDN's coal off-take for a minimum of two years
- Xstrata to provide rail/port access for a minimum of two years, on a take or pay basis
- Xstrata to guarantee water allocation: 1000 ML

Value Added Benefit: Deal provides benefits of Xstrata marketing expertise due to their market share of coking coal sales, access to market during a time of coal transport constraint

From the Minesite February 2007 presentation.

Some figures

Shares in issue: 154m
Share price: 38.25p
Market cap: 59m

In December 2006 CDN placed 66.2m shares at 40p, net proceeds 24.6m.

Convertible loan notes 2007 issued in December 2006 - 6.04m, conversion price 41.2p or redemption on 14 December 2007.

Convertible loan notes 2010 issued in June 2007 (hence the EGM) - 12.5m, conversion price 50p.

Reason for the June 2007 convertible loan note issue: Since the successful fund raising and re-admission of the Company's shares to trading on AIM in December 2006, the Company has, as part of its ongoing internal review processes, undertaken a review of its budget and operational plan. As a result of a detailed cost benefit analysis the proposed arrangements with the Company's mining contractor were revised, with the aim of bringing the operational mining activities relating to the Cook Mine in-house and providing the Company with a significant reduction in its overall mining costs when in full production. However in order to obtain the cost benefits associated with doing this, the capital expenditure for the mining machinery has become Caledon's responsibility.

Additional reasons for the proposed fund raising relate to working capital. Since the beginning of 2007, the Company has faced production delays, related to incidents that were beyond management's control.

http://www.investegate.co.uk/Article.aspx?id=200706130700502549Y

Payments to make in 2007:

- Repayment of the convertible loan notes 2007: 6.04m (could be settled in shares)
- Final payments for Minyango: 13.5m

Management

Robert Alford executive Chairman: joined in 2000, a member of Lloyds, registered as a Non-Executive Director with the FSA

George Salamis CEO: one of the founding shareholders of Caledon

Mark Trevan MD: 25 years with Rio Tinto as senior executive, joined in 2006

Peter Seear Chief Operating Officer, joined in 2006

Paul Ingram Executive Director, based in Asia for the last 15 years

Graham Mascall non-exec, ex-Billiton

Nick Clarke non-exec, MD of Oriel Resources

Shareholders

Watami Trading 8.1%
Gartmore Investment Management 6.1%
UBS Global Asset Management 6.1%
JP Morgan Fleming Asset Management 5.7%
US Global Investors 4.6%
AXA Framlington 4.4%
Hermes Pension Management 4.1%
Capital Research & Management Co 3.4%

Valuation

SRK valued Cook Mine on a project stand-alone basis, not including acquisition costs): NPV of $US256m @ 10%, IRR 583%,

- Cash flows of $US30m US$67m
- 20 years of resource, per tonne
- Coal prices used: 2007-09: $US100, 2010: $US90, 2012: $US75, 2014: $US80, 2016: $US84

Costs acquisition cost: US$34m, additional funding required for capex and working capital (June 2007 placing): US$25m, say US$56m (because it makes the sums easier).

So net value US$200m, equates to 100m.

This ignores the value of Minjango.

Current market cap is 59m.

The USP

Before getting carried away with excitement, one needs to revisit CDN's USP, which is critical to whether CDN justifies a substantial mark-up in share price.

Success or failure depends on two systems:

- Magatar from South Africa
- Flexiveyor/Prairie continuous conveyor from Canada

If both systems work in harmony in Australia, the 'tired old lady' begins to sing a wonderful song for shareholders called '1.8mt of coking and thermal coal per year'.

At a margin of, say, US$35 per tonne, 1.8mt produces an operating cash flow of $63m (31.5m) per year.

And in the audience is Xstrata watching and admiring the 'tired old lady' called Cook, with an existing deep and meaningful relationship with Cook, it is entirely possible that Xstrata will make CDN an offer to take both Cook and the technology off the company's hands at some stage in the future.

I therefore suggest that Fools watch out for announcements in the 3rd and 4th quarter of 2007 on whether the Magatar and Flexiveyor/Prairie continuous conveyor work in harmony, the 'tired old lady' could suddenly become very attractive.

One other reason for considering CDN terrific logo.

Finishing on a down note

Given I have a reputation to uphold as being a 'bottle half-empty' kind of guy, Fools should note the following:

- The CDN website needs to be improved (as at 5 July, the 2006 annual report was still not available).
- More important, the board of directors will be 'top heavy' once Australia is bedded down and the Chinese assets have been disposed of or written off. It would not be surprising to see a slimmed down executive team in the next 12 months, which will be good news with regard to overheads.
- Tremendous angst is expressed on the ADVFN CDN thread from time to time (okay, daily). Clearly several shareholders, not least one of the private investors who attended yesterday's EGM, are still suffering Chinese-induced nightmares. Given trading volumes are not high, it does not take too much selling to push the share price down. As a consequence, any tick up in the CDN SP is likely to be slow rather than rapid as the disgruntled bale out as the SP reaches (touch wood) higher levels.

For me personally, I am comfortable to hold as I have met several members of the board, in particular, Peter Seear. For a mining engineer, it must be a wonderful opportunity to introduce into a new country technology that has been tried and tested elsewhere in the world. Peter certainly has the enthusiasm and the experience to make a 'tired old lady' sing.

And there is more

For those who want to learn more about CDN, I suggest that you watch Robert Alford's presentation at February 2007 forum:

http://www.minesite.com/webcasts.html

There is a brief mention of CDN in what is becoming a legendary research article on mining companies close to production.

http://www.minesite.com/fileadmin/content/pdfs/Brokers_Reports_5/juniorminingpaydirt290607.pdf

Enjoy.

Regards.

Colin

Posted: Sun, Jul 8 2007. 11:58 PM IST Delhi
Corporate News

During a recent coal sale, Bhushan Steel Ltd applied for 160,000 tonnes of coal through an intermediary. It ended up with just 7,000 tonnes, enough to last it for three days at the most.
Surging demand for coal is creating a scramble among steel producers, but proving lucrative for those in the business of coal trading.
In last months online sale of the commodity, the Rs4,200 crore Bhushan tried to book coal through two traders, Metal Scrap Trading Corp. Ltd and Coaljunction.com.
Nearly half a million tonnes (mt) were up for sale, but demand for domestic coal was nearly 20 times at 9,209,070 tonnes. Hundreds of bidders paid an average Rs7 lakhper rake (3,500 tonnes)or Rs200 per tonneas theirearnest money deposit to secure supply.
Depending on the grade, Indian coal costs Rs675-2,300 per tonne, cheaper than coal imported from Indonesia and Australia, priced an average Rs2,100 and Rs3,600 a tonne, respectively.
But in the end, steel manufacturers such as Bhushan were left with no choice but to pay a 22-33% markup to coal traders who bid for the commodity along with steel makers and acquire it the same waythrough e-trading agencies authorized by coal producer Coal India Ltd.

On the rise yet again.

Any one object to a new header been given and new thread started with a link to the old one as the header doesnt stand out on the thread list?.

Fine by me.

Cheers goal, Ill give it another 24 hours just in case we have someone who doesnt like the idea.

The header at present is easily missed on the thread list.

Ill do the change over tomorrow.

Moving up slowly but surely.

latest note from Growth Equities & Research on CDN..........

"On 13th June, Caledon requested an EGM to approve the placing of 12.5 million unsecured convertible loan notes at 8.5%. The notes have an initial conversion price of 50p, representing a 20% premium to the share price and the company has the right to force conversion if the average share price exceeds 80p over a 20 day period (following the initial 18 months after the date of issue).

Caledon is raising the money to fund its working capital requirements. The company has, since its return to AIM, carried out a number of review processes. The mining arrangements have changed as the company intends to bring its operational mining activities inhouse which should provide Caledon with significant cost savings. However, in order to obtain the cost benefits, the company requires to invest in new machinery. Caledon has faced production delays as a result of a spontaneous combustion incident at the Cook mine. The effect was a longer and more costly build up to production than had been expected, setting time schedules back by 6 - 8 weeks.

The group's working capital position has also been eroded as a result of delays in delivery of and breakdown in essential equipment.

On 25th June, the company published its final results for the year to 31st December 2006. Losses for the year totaled 2 million while the company had cash of just over 11 million at the period end. At the Cook Mine, the overall strategy for the current year remains broadly intact. The company is confident that the proposed new mining methodology will deliver the productivity improvements originally projected. At Minyango, an upgrade in resource estimate from 205 million tonnes to a JORC compliant 240 million tonnes has given the board confidence to settle the second tranche of payment - A$9.6 million in shares. Infill drilling targetted at improving the JORC estimate is scheduled for the second half of 2007. A number of holes are also scheduled for the southern section of the main tenement, which to date has not been included in the resource calculations.

The shares so far, have not reflected the positive news from both projects in Australia. However, our valuation suggests that Cook alone is worth 71p, Minyango around 3.6p (though given the SRK upgrade, this figure is likely to be increased) and the group's Chinese assets another 3.4p. On that basis, at 40.5p, the shares are undervalued and ahead of a significant ramp up in production our stance remains buy"

It's only a matter of time before CDN reaches it's true value imo.

Cant be far off Goal.

Nice tick up this afternoon.

Yes, we like that.

Caledon CEO Salamis to leave; Cook mine production 9,000 tonnes/wk by end-July
AFX


LONDON (Thomson Financial) - Caledon Resources PLC said chief executive George Salamis has decided to leave the company, adding that there is no immediate plan to replace him.

It also said production at the Cook Mine has increased to about 9,000 tonnes per week by end-July, and that the first coking coal shipment of 45,000 tonnes is scheduled to sail mid-August with the proceeds expected in the first half of September.

The company said it has signed a letter of to sell Blackwatch Resources BVI Ltd and Blackwatch Mining BVI Ltd to Indochina Minerals Limited for 250,000 aud.

Caledon added that it is working towards finding a suitable acquirer for the Mojiang project.

'A total exit from China will permit management to focus all of their attention on the production of coal in Queensland,' vice president-exploration, Paul Ingram said.



tf.TFN-Europe_newsdesk@thomson.com

jr/pmi/ajb

Media comment, click HERE

Outstanding RNS today, GET IN WHILE THEIRS TIME.
cyril