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Forum - Mining and Commodities Eh! (Morgan Stanley China - CAF)    All things commodities, with a Canadian Junior Miner focus.

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From: Jimjones1972 (Rep: 3) reply to Jimjones1972Date: 02/13/2018 10:59
Forum: Mining and Commodities Eh! - Msg #6123 - List CAF msgs Thread #673914972 (Rec: 0)
Here are three important factors that will significantly increase the value of CAF:

1) Sales. As reported in their last MD&A, sales are lower than usual apparently, but prices are much higher. However, the next quarters coming up will show increased sales. From the MD&A:

For the 9-month period ended July 31, 2017, the Corporation reported a net income of $595,716 (C$741,080) compared to a net loss of $315,919 for same period the previous year. The increase in net income was directly related to an increase in sales during the period, as well as improved profit margins generated from efficiencies generated from Quantum s new calcining facility, which only started fully operating in August 2016. Revenue increased to $8,443,667, in comparison to $2,907,198, for the same period last year. The significant increase in sales is due to a combination of unusually low sales during the last fiscal period combined with increased prices per sales unit. The Corporation expects to report a slight increase in Sales during Q4 and expects fiscal year end 2018 to reflect increased demand as the Corporation hopes to bring on a new customer.

2) Price of Anthracite(coking coal) for steel manufacturing. This is important as increased sales and higher commodity prices go hand and hand. From the chart below, coking coal is near multi year high's. Problem with the chart is it's general coking coal pricing and not showing the premium CAF gets for it's Anthracite coal, which is rarer and more valuable.

3) Rand/USD/CAD Exchange rate. There are many public companies that have good sales, but the exchange rate can either make of break them. In our case, the Rand is getting stronger as a new pro business leader is sworn in and Jacob Zuma leaves. But not only that, the CAD is getting weaker at the same time. This means that once Canaf converts their Rand into USD, then it must be converted into CAD to reflect it's proper value on the TSX Venture, thus giving us an additional premium. The rand is still near a 2 year high versus the USD.

Reply to Jimjones1972 - Msg #6089 - 01/03/2018 15:35

CAF.V is starting to gain momentum as a bunch of news is coming down the pipeline in the next 60-90 days. Remember, this is easily the most undervalued earnings based company on the venture exchange. Trading at a 3.3X multiple(similar companies are 15-20X), and with an Asset/Debt Ratio of roughly 3:1, leveraged towards the USD. Just over 47 million shares outstanding with 33% insider held. CAF refines coking coal used for the steel industry, not typical coal that you find everywhere for burning. It's a special type of coal that only makes up 1% of the world coal reserves. BHP Bhiliton is Canaf's long term client and the largest producer of coking coal in the world, so it's very dependent even on a small company like CAF.

What to expect in 90 days:

- Year End Results February 2018
- Q1 2018 Results March 2018
- Update on a major deal that was announced in the MD&A

CAF has already generating $750K CDN in profit for 2017 over 9 months. In their MD&A it clearly states that Q3 was a weaker quarter and that Q4 2017 and Q1 2018 will have increased sales which will obviously generate larger profits. Recently South Africa had an election and the new leader is very pro business and could usher in major reforms to make South Africans companies more profitable.

All information can be found on Sedar for those that want to confirm all this.
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