Under the North Sea is enough coal to satisfy UK demand for at least ten years

One Stock Set to Soar from the Underground Energy Revolution

Date 06/01/2010

The Right Side

Tom Bulford

The situation that could trigger a rally in these two stocks

South Africa is desperately short of power. Although the recession temporarily reduced demand from the mining industry, power cuts are now re-emerging on a regular basis. State generator, Eskom, is simply not keeping pace with demand. With the World Cup coming to South Africa next summer this is not only a major economic problem but an embarrassment. SNRP’s anthracitic coal is ideal for burning in power stations.

It is also ideally situated because some 10% of the power that Eskom generates in the north of the country is lost in transit to the important south-eastern coastal cities of Durban and Port Elizabeth. So SNRP’s business plan involved a tie-up with AIM-quoted IPSA (ticker: IPSA) which planned to build one power plant at the site of the Elitheni coal mine and another at Coega near Port Elizabeth.

IPSA’s plans, however, fell foul of the credit crunch and left it with the need to sell off the giant turbines ordered for Coega. I understand that this sale could be close. If so, it could be a trigger point for both its shares and those of SNRP.

But SNRP is not relying on this alone.

It is already selling coal to local homes and brick makers. It has also struck a deal that will allow industrial users to clean up their environmental act by converting their boilers to use SNRP’s anthracitic coal.

But the biggest opportunities could lie in the export of coal, for which SNRP is already receiving enquiries from India and China, and in that remarkable Underground Coal Gasification technology.

SNRP is already in discussions with two local firms keen to use coal-derived synthetic gas for power generation and any such deal would underwrite SNRP’s prospects.

Like a number of small resource companies, Strategic Natural Resources was blown off course by the financial crisis. Now many of them, SNRP included, are set to deliver.

As he produced a sample of coal from his brief-case to show me, Jeremy Metcalfe had a glint in his eye. No wonder.

Good investing,

Tom Bulford
For The Right Side

Editor’s note: Tom’s not just looking at energy, he’s got dozens of great investment opportunities lined up. If you want to learn more about intercepting the most exciting shares in the market today, take a few minutes to read Tom’s latest report.

Your capital is at risk when you invest in shares, never risk more than you can afford to lose. Please seek independent financial advice if necessary. Fleet Street Publications Ltd. 0207 633 3600.

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