Why the Bathurst Resources (ASX:BRL) share price is rocketing 63% higher

This coal miner is rocketing higher today after a favourable court ruling…

| More on:
Vanadium Resources share price person riding rocket indicating share price increase

Image source: Getty Images

The Bathurst Resources Ltd (ASX: BRL) share price has been an exceptionally strong performer on Wednesday.

In morning trade, the coal producer’s shares are up 63% to a 52-week high of 70 cents.

This gain means the Bathurst Resources share price is now up 84% since the start of the year.

Why is the Bathurst Resources share price rocketing higher?

The catalyst for the incredible rise in the Bathurst Resources share price on Wednesday has been a favourable outcome in the Supreme Court of New Zealand.

According to the release, the Supreme Court has upheld Bathurst Resources’ appeal against the case brought by L&M Coal.

What was the case?

Back in 2018, legal proceedings were brought against the company by L&M Coal in relation to a US$40 million performance payment. This stems from an agreement that Bathurst Resources signed when it bought the Escarpment mine on the Denniston Plateau.

That agreement was for an upfront payment of US$35 million and then US$40 million due when Bathurst had shipped 25,000 tonnes of coal and another US$40 million when one million tonnes of coal had been shipped.

However, although Bathurst Resources had produced 50,000 tonnes of coal from the mine, it claimed that this didn’t trigger the performance payment because it technically was not shipped overseas. Instead, the company had sold the coal to Westport’s Holcim cement plant.

According to today’s release, the Supreme Court did find that the US$40 million performance payment had been triggered.

However, the court also ruled, contrary to the prior court judgments, that Bathurst Resources can rely on the Royalty Deed which forms part of the original agreement. This means that for as long as the relevant royalty continues to be paid (even if that sum is zero), payment of the performance payment can be indefinitely deferred.

Furthermore, the Supreme Court also ruled that Bathurst’s Supreme Court legal costs must be reimbursed by the appellants, together with previous costs re-determined in the High Court and Court of Appeal in light of the judgement.

Should you invest $1,000 in Bathurst Resources right now?

Before you consider Bathurst Resources, you'll want to hear this.

Motley Fool Investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now... and Bathurst Resources wasn't one of them.

The online investing service he’s run for nearly a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.* And right now, Scott thinks there are 5 stocks that are better buys.

*Returns as of August 16th 2021

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Share Gainers