Analysts are keeping a close eye on a possible Pike River Coal (NZX:PRC) cash flow issue.
Monthly cash burn, calculated from net operating cash flows of $23.3m for the June quarter, is at $7.8m – up from an annual average of $5.5m per month, as estimated in May.
Added to this is a delay of approximately one month in the company’s second coal shipment, now due at the end of this month, and a slight lag in hydro mining commencement.
A Forsyth Barr investment report released today suggests that if the coal shipment (worth about $6m) is delayed by another three weeks and current cash burn rates continue, then cash may run out in September.
“It is therefore crucial that PRC ramps up production as profiled – if it doesn’t, we expect PRC will need to find additional finance.”
"While PRC is cheap on a value basis and compared to its peers, the cash burn rate is such that we are not comfortable that PRC is going to be able to easily reach a cash neutral position with its current cash balance."
Pike River chief executive Gordon Ward said that the higher cash burn rates were a "timing difference".
“We’ve accelerated some of our development expenditure... to improve the mine’s ability to meet our production target for this current financial year, which is 620,000 tonnes."
The company has contracted additional mining equipment, hired additional staff, and brought forward the lease of the large ABM20 coal cutting machine from January to the end of this week.
Mr Ward acknowledged the importance of meeting monthly production targets.
Pike River aims to export 20-30,000 tonnes per month from September 2010, increasing to around 40,000 tonnes per month by December 2010.
The company successfully completed a $90m capital raising initiative last May.
Tue, 03 Aug 2010