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Colombia Energy Resources, Inc. (CERX) Stands To Massively Benefit As Columbia Revitalizes Rail/River Infrastructure

May 22, 2012 2:55 PM ETCERX
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Colombia Energy Resources, which was formed in 2010 to develop the rich coal resources in South America for export sale to global markets (especially the U.S., for whom 42% of all energy in 2011 came from coal), reported today that the company can look forward to some serious savings as transport costs come down amid the planned infrastructural renovation by the Columbian government and private industry.

The Columbian government's recently released plan to put some $7.5B into refurbishing and upgrading the country's rail and river barge system will directly benefit CERX, who will see improved cost structure as both methods will be widely used by the company for moving the company's hard coking coals to market. CERX has amassed some 25k acres of resource thus far. The Columbian government's program has seen enthusiastic support from several private companies, with capital placements by three national companies, as well as two companies from Brazil, and one each from Israel and Switzerland.

President of Columbia's Infrastructure National Agency (ANI), Luis Fernando Andrade Moreno, underscored the drive to obtain as much foreign participation in the effort as possible, describing the planned activity as the most ambitious infrastructure development program ever undertaken in the country's history. Moreno explained how this is a great opportunity for U.S. companies, as the revitalized rail/river transport infrastructure will help to ease energy prices state side. ANI was created to serve an administrative role in the program roll out/maintenance and the organization puts overall investment in the operation as approaching $7B by 2014 (this figure more than doubled by 2011 to around $4B and looks to go much higher) .

Key among the planned renovation for CERX is the improvement plan for the Magdalena River, where the national government and local municipalities look to spend some $135M over the next four years restoring optimal navigability to approximately 932 miles of river way. Huge news for CERX, who uses the river barge system quite a bit, in fact, this planned expansion should increase overall annual transportation of coal within the country about 157% by 2018, from 35M tons, all the way up to 90M.

Needless to say operators like CERX are glowing right now, as they look forward to significant transportation-related cost improvements across the entire spectrum of the business. Additionally, planned expansion of the nation's rail system will allow as much as half of the entire coal supply to be moved by train (the rest via river). The rail programs, taken as a whole, should be particularly significant to overall cost reductions, making Columbia an even more attractive place to do business.

The cost equation is significant for any coal developer operating in Columbia, and, according to data out of the Chamber of Infrastructure, the current lack of sufficient multimodal transport adds a whopping 80% to the underlying cost of transportation. The fact that half of the coal should be movable by train (with river barging taking up the remainder), led the Minister of Columbia's department of Mines and Energy to project that total production nationwide could hit 124M tons by just 2014 (152M by 2020).

CEO of CERX, Ronald G. Stovash, emphasized direct benefits to the company as a result of these improvements, with a huge boost to both long-term growth and underlying profitability margins. Stovash pointed to extensive use of trucks by CERX and asserted that while this was still economical, the cost effectiveness and efficiencies introduced by moving to rail/barging would increase shareholder value substantially.

There is plenty of business still to do in Columbia and CERX aims to be among the top resource consolidators in this space, as the nation contains the richest coal supplies in South America, with some 7B metric tons of recoverable coal reserves. Stovash indicated that as the company transitions, Columbia could move up to being among the lowest cost, metallurgical coal development regions on earth. Stovash tantalized shareholder's appetite for profit saying that as this transition was carried out, the company would see the savings drop "right to the bottom line."

For more information on Colombia Energy Resources, Inc. please visit the company's website at: ColombiaEnergyResources.com

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