Is Metallurgical Coal the Holy Grail for Regency Mines (#RGM)? Cause for excitement brewing?

By Richard Mason


If you followed the story at the beginning of the year you would be forgiven for thinking that Regency Mines (LSE:RGM) was on the cusp of a transformational move into coal production. The excitement surrounding its new investment into US metallurgical coal, was backed by impressive financial projections and momentum, driven by the new presidency of Donald Trump and his support for the US energy sector. Then things went quiet.

So what happened?

Well… an excitable few months ensued, and the share price was on upward trend as the market priced in the expectation of the company delivering on its own promises.

Unfortunately, things did not develop as some might have hoped. At the end of July news on coal arrived, detailing operational difficulties, and a somewhat uncertain relationship with the company’s partners in in the States.

When this news was announced, some Regency investors would have been entitled to say there was correlation with the inauguration of Donald Trump and the Regency Chairman Andrew Bell, in terms of their respective “oaths of office”, some wishing that they had perhaps been part of the vocal minority in protest against it.

For some, the news on an uncertain coal future was perceived as bad, and yes naturally, the news delivered wasn’t what was on the tip of the tongue of investors.

However, I take a different view, and I write in support of the company and its journey going forward.

The direction Regency is taking on coal now, seems more expansive and professionally driven, which has the support of financing specialists and a commodity driven management team. This will lead to production potential on a much wider scale. News on this must be near.

So read the detail of the RNS on the 28th of July and open your eyes to a much bigger coal entity. When news arrives, I suggest this will more than satisfy existing investors and will also appeal to new investors attracted to the announcement of production revenue.

We have also since seen the Chairman execute some excellent business on the sale of its non-core Horsehill interests. This will bring in a total of £1.9m in cash and will help open up the business plan on coal and allow for potential new ventures.

Regency has already deleveraged the business, and cash reserves have also been deployed into acquiring a significant interest in newly listed Curzon Energy PLC. Director Scott Kaintz should be credited for his work here, and no doubt, there will be news on the coalbed methane story in due course.

I should also highlight that Regency has on its books two assets that could absolutely ignite at any time.

The Mambare project is a Nickel / Cobalt Jorc Resource play which potentially holds one of the worlds largest Nickel Laterite deposits. Should we see strong Nickel prices, this asset becomes very interesting indeed.

Furthermore, I encourage readers to take a look at Regency’s Motzfeldt licence area in Southern Greenland. This one one of the worlds largest undeveloped Niobium-Tantalum deposits with additional Rare earth credits.

Let’s see how these strategic investments play out as we stretch away from the bottom of the cycle. In the meantime, while the US looks to boost output from the energy industry, I look forward to the news that Regency has on Metallurgical Coal.

AUTHOR – Harry – AIM

Follow on Twitter – @SHARES_FTSE_AIM


The Author of this piece owns shares in Regency Mines.


Author: Richard Mason

This article does not provide any financial advice and is not a recommendation to deal in any securities or product. Investments may fall in value and an investor may lose some or all of their investment. Past performance is not an indicator of future performance.

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