Companies: CDN   

Aussie coal play Caledon Resources is targeting 1.1 million tonnes of production from its Cook mine in Queensland’s Bowen Basin.

The AIM-quoted company, which plans to raise £15 million through a listing Down Under in May, sells Cook’s output, mostly coking coal, through mining giant Xstrata, the mine’s previous owner, with most of it going to India. Caledon says not much of Cook’s production is on long-term contract, which should enable it to benefit substantially from the current surge in the spot coal price.

The company owns the larger Minyango coal property, which is an earlier stage and is estimated to hold possible resources of 240 million tonnes, against Cook’s 176 million, and reserves of 93 million tonnes, against Cook’s 23.6 million. To extract the hoped-for benefits from Cook, Caledon is putting its faith in the ‘Magatar’ continuous haulage system, which provides a permanent link between miners at the coalface and section conveyors. It has significantly increased cutting yields in Canadian potash and South African coal mining.

Mentioned by Growth Company Investor in 2005 as a ‘brave speculation’ at 3.5p in its former guise as a China gold prospector and highlighted a year ago at 40.25p, Caledon shares have now reached 54.5p, valuing the company at nearly £93 million.

If Magatar works its wonders, they could still outperform others in the sector.

Growth Company Investor subscribers have full access to all our AIM and small-cap share recommendations. To subscribe today with a half-price offer, and gain immediate access to all the recommendations, click here.