Pike River Coal's pending capital raising announcement is likely to be more interesting for shareholders than its interim results expected on Wednesday.Pike River Coal's (NZX: PRC) $3.4 million first shipment of 20,000 tonnes of hard coking coal left Lytt
Pike River Coal’s pending capital raising announcement is likely to be more interesting for shareholders than its interim results expected on Wednesday.
Pike River Coal’s (NZX: PRC) $3.4 million first shipment of 20,000 tonnes of hard coking coal left Lyttelton Port last week for India and its second shipment (of 40,000 tonnes) is scheduled for the April-June 2010 quarter.
The interim result is slightly irrelevant given the company only last week put out its first shipment.
But plagued with setbacks and delays, the company’s cash flows are expected to come under scrutiny. For the six months to December 2009 Pike River recorded negative cash flows of $35.2 million, mostly driven by high production costs.
The company had $10.9 million of cash at the end of the December period.
However the international market for coal has been strong, led by China and increasingly, India. Pike River expects prices to rise even higher than forecast - by 40% from April 2010 to $US180 a tonne.
This month Forsyth Barr estimated the company was trading at a discount of between -40% and -50% to its peer group, largely because of market jitters after a sizeable capital raising was flagged last year.
It issued an ‘accumulate’ investment view, despite remaining cautious about the long-term production capability of the mine.
Pike River chief executive Gordon Ward has previously stated the company has the infrastructure to mine one million tonnes of coal for the next 18 years, but Forsyth Barr assumes 800,000 tonnes a year, based on the company’s track record and the nature of underground coal mines.
It expects the company will raise between $40 million to $50 million (double what the company initially flagged), assuming the Liberty Harbor convertible bonds (worth $38.8 million) are not redeemed.
Pike River missed its November 30 deadline to achieve production, under a condition of the bond deal and wants a covenant extension to June 30 this year, but Liberty Harbor has the right to ask for repayment if the new terms can’t be agreed within the 90-day notice period.
