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Tight export market spurs investor interest in newly minted Bowen Coking Coal

Bowen Coking Coal Ltd.'s shares continued to go up following its Oct. 11 debut on the ASX, spurred by a tightening in seaborne coking coal supply.

The company emerged from the reverse takeover of Cabral Resources Ltd. by Cape Coal Pty. Ltd. Cabral, which was focused on iron ore exploration in Brazil, struck a deal in April with Cape Coal to acquire Bowen Coking Coal Pty. Ltd.

While Bowen Coking Coal ended its first session on par with its public offer price of 2.3 Australian cents, capitalizing the company at around A$10.8 million, it gained over 20% on its second day on the Australian bourse.

CEO and Managing Director Gerhard Redelinghuys told S&P Global Market Intelligence Oct. 12 that he is happy with how the company performed on its first day.

"Understandably, the Cabral shell was suspended since late last year, which would always result in some selling on the first day," he said. "In the afternoon session we saw significant buyer interest as the news on Bowen Coking Coal started to spread, which also transpired into a 10% gain in early trade this morning."

Bowen Coking Coal received significant interest from both Australian and international investors, but decided to close the public offer once it reached A$4.6 million because of time and constraints from its option agreements.

"Apart from the asset vendors — Cape Coal, Australian Pacific Coal Ltd. and Acacia Coal Ltd. — our investors are a good blend of Australian retail and institutional investors," Redelinghuys said.

According to the executive, Cabral relinquished its iron ore tenements in 2016, but still believed in the value of steel making materials, hence the move into coking coal.

Redelinghuys said Australian coking coal is regarded as some of the highest quality in the world with a definitive freight benefit to the Asian markets.

"The price volatility in the markets over the last year has again demonstrated how tight seaborne coking coal supply is," he said.

"Our view is that we will still see strong demand for coking coal in the short and medium term from Asia which will support prices around current levels, with maybe a decline in the longer term."

Bowen Coking Coal now plans to begin exploration drilling at the Cooroorah project in Queensland's Bowen Basin before the end of October, which the company hopes will result in an increase in the current resource of 125 million tonnes.

Redelinghuys said Bowen Coking Coal also intends to screen potential contractors with the aim of commencing a pre-feasibility study on the Comet Ridge project in the first quarter of 2018.

The project, which is located about 8 kilometers from BHP Billiton Mitsubishi Alliance's Blackwater coal mine, hosts a resource of 8 million tonnes in the measured category, 9 million tonnes in the indicated category and 40 million tonnes in the inferred category.

By the end of the second trading session, Bowen Coking Coal shares pared back some of their gains to close up 13% at 2.6 cents.