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PRC - Pike River Coal

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Bushman

Bushman

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Just thought I would start some discussion on this stock. Looking for some thermal coking coal plays given the continued projections for global steel demand.

PRC - Pike River Coal

Currently developing a hard coking coal deposit on the west coast of the South Island of NZ.

IPO on the ASX about 3 months ago at $1. Current SP @ $0.785.

Background:
* 180m shares with cornerstone investors NZOG (62.3m), Suarashtra (17m) and Gujarat (20m). 65m shares in recent IPO. 20m options.
* Mine expected to start producing in April 2008 (delayed from expected March start date as indicated in IPO.
* Mine development budget has a current $11m increase due to 'more expensive fractured rock costs' in constructing 2,300m tunnel to coal seem. Revised mine capex $185m.
* Fully financed up to mine opening via equity and debt facility (Westpac). NZOG has agreed to finance initial mine working capital requirements.
* Premuim hard coking coal with low ash content. Long term conditional sales contracts entered into with keystone investors Gujarat, Suarastra.
* Mine will be of the Brunner Seam - 11.5mt measured, 27.5 mt indicated and 19.5 mt inferred. Mine will be 1 mt per year from FY09 with a cash cost of $77NZD per tonne. Conservative mine estimate is that 17.6 mt will be recoved over the life of the project, giving a mine life of 18 yrs.
* Blue sky upside of deeper Paparoa coal seam can be accessed.
* IPO sales price $96USD per tonne. Recent announcement suggests this price will actually be $115USD per tonne based on current demand.
* Annual EBIT (based on sales 1 MT) = Revenue $115m USD less mine costs $57.75m USD (assuming USD/NZD ER 0.75) = $57.25m.
* Current mkt cap $141.3m.

Worth keeping an eye out with global steel demand set to continue price pressure on coking coal. Minimal risks as far as I can see - main one would be an initial placement to raise working capital requirements before coal sales turn this into a cash cow.

Be interested to hear people thoughts.

Note it is an illiquid stock and longer term investment. Def would not suit day traders.

I do not own any of these as yet. On my watch list.

Cheers
Bushman
 
rail access to deep water at lyttleton, tunnel 3/4 complete, all going well.
im a believer in quality over quantity and this looks the goods.
it will surely spike when they hit the seam.
the transport is 10% cheaper than planned.
cash cow is right bushy
 
Bushman said:
Just thought I would start some discussion on this stock. Looking for some thermal coking coal plays given the continued projections for global steel demand.

PRC - Pike River Coal

Currently developing a hard coking coal deposit on the west coast of the South Island of NZ.

IPO on the ASX about 3 months ago at $1. Current SP @ $0.785.

Background:
* 180m shares with cornerstone investors NZOG (62.3m), Suarashtra (17m) and Gujarat (20m). 65m shares in recent IPO. 20m options.
* Mine expected to start producing in April 2008 (delayed from expected March start date as indicated in IPO.
* Mine development budget has a current $11m increase due to 'more expensive fractured rock costs' in constructing 2,300m tunnel to coal seem. Revised mine capex $185m.
* Fully financed up to mine opening via equity and debt facility (Westpac). NZOG has agreed to finance initial mine working capital requirements.
* Premuim hard coking coal with low ash content. Long term conditional sales contracts entered into with keystone investors Gujarat, Suarastra.
* Mine will be of the Brunner Seam - 11.5mt measured, 27.5 mt indicated and 19.5 mt inferred. Mine will be 1 mt per year from FY09 with a cash cost of $77NZD per tonne. Conservative mine estimate is that 17.6 mt will be recoved over the life of the project, giving a mine life of 18 yrs.
* Blue sky upside of deeper Paparoa coal seam can be accessed.
* IPO sales price $96USD per tonne. Recent announcement suggests this price will actually be $115USD per tonne based on current demand.
* Annual EBIT (based on sales 1 MT) = Revenue $115m USD less mine costs $57.75m USD (assuming USD/NZD ER 0.75) = $57.25m.
* Current mkt cap $141.3m.

Worth keeping an eye out with global steel demand set to continue price pressure on coking coal. Minimal risks as far as I can see - main one would be an initial placement to raise working capital requirements before coal sales turn this into a cash cow.

Be interested to hear people thoughts.

Note it is an illiquid stock and longer term investment. Def would not suit day traders.

I do not own any of these as yet. On my watch list.

Cheers
Bushman
Click to expand...

Wow thanks, another coal stock!

27 November 2007
Pike River Coal Announces New Coal Transport Route
Pike River Coal Limited has today announced it will transport it’s premium hard
coking coal by rail to Lyttelton, Christchurch for export under a new agreement
signed with Solid Energy NZ Limited (Solid Energy).
The 18 year agreement to use rail, supersedes previous transport arrangements with
West Coast Coal Company Limited (WCCC) which were based on coastal shipping
of Pike River coal from the port at Greymouth to Port Taranaki for export.
Pike River Chief Executive Gordon Ward says “The main factors leading to the
change in transport mode were a significant recent increase in rail capacity that has
allowed Solid Energy and Toll Rail to transport all of Pike River’s coal by rail and
the fact that the financing conditions in the transport agreement were not met.”
Following ONTRACK’s upgrade of the rail route and implementation of improved
traction control on trains, Solid Energy and Toll Rail are able to introduce 45 wagon
trains boosting the capacity and efficiency of the Midland line. Since the
Government took back ownership of the rail network in July 2004, investing $25
million in the Midland line through ONTRACK, Solid Energy has committed more
than $100 million to the line through its long term contract with Toll Rail and then
spent a further $15 million on the new Cobden rail bridge over the Grey River.
The total cost to transport Pike River coal from the coal preparation plant to the point
loaded on panamax vessels at Port Lyttelton under the new agreement with Solid
Energy is approximately NZ$39 per tonne. Mr Ward said “This cost is at a level at
least 10% less than WCCC were able to offer and slightly below the level forecast in
the IPO prospectus.”
Port Taranaki Chief Executive Roy Weaver says “We worked extremely hard at
WCCC to establish an innovative coastal shipping alternative transport solution for
West Coast exporters with Pike River Coal providing the base load. We are very
disappointed in not being able to build the transport chain for this project, but were
unable to constrain construction cost increases since 2005 to match the rates offered
on the newly renovated Midland Line. WCCC wishes Toll Rail, Solid Energy, Port
of Lyttelton and Pike River Coal Limited all the best for a successful venture.”
Pike River has agreed with Solid Energy that it will have capacity reserved of up to
1.3 million tonnes per year on the rail network and has priority access to rail and port
facilities to transport that tonnage.
Mr Ward said “One benefit of this decision will be the shorter distance Pike River
news release
coal travels by road and the consequent reduction in emissions and on traffic through
the Greymouth township. Delivery by Solid Energy and Toll Rail of a proven annual
capacity of more than 4 million tonnes has given us the confidence to move forward
with Solid Energy’s transport supply proposal”.
For further information contact:
Gordon Ward 04-4940190
Chief Executive
Pike River Coal Limited
 
Just looking at this one more closely after the lift in the share price and particularly the quality of the coking coal, costs and any shipping problems: http://www.pike.co.nz (Having problems with this website, maybe it will get better.)
 
Bushman said:
Just thought I would start some discussion on this stock. Looking for some thermal coking coal plays given the continued projections for global steel demand.

PRC - Pike River Coal

Currently developing a hard coking coal deposit on the west coast of the South Island of NZ.

IPO on the ASX about 3 months ago at $1. Current SP @ $0.785.

Background:
* 180m shares with cornerstone investors NZOG (62.3m), Suarashtra (17m) and Gujarat (20m). 65m shares in recent IPO. 20m options.
* Mine expected to start producing in April 2008 (delayed from expected March start date as indicated in IPO.
* Mine development budget has a current $11m increase due to 'more expensive fractured rock costs' in constructing 2,300m tunnel to coal seem. Revised mine capex $185m.
* Fully financed up to mine opening via equity and debt facility (Westpac). NZOG has agreed to finance initial mine working capital requirements.
* Premuim hard coking coal with low ash content. Long term conditional sales contracts entered into with keystone investors Gujarat, Suarastra.
* Mine will be of the Brunner Seam - 11.5mt measured, 27.5 mt indicated and 19.5 mt inferred. Mine will be 1 mt per year from FY09 with a cash cost of $77NZD per tonne. Conservative mine estimate is that 17.6 mt will be recoved over the life of the project, giving a mine life of 18 yrs.
* Blue sky upside of deeper Paparoa coal seam can be accessed.
* IPO sales price $96USD per tonne. Recent announcement suggests this price will actually be $115USD per tonne based on current demand.
* Annual EBIT (based on sales 1 MT) = Revenue $115m USD less mine costs $57.75m USD (assuming USD/NZD ER 0.75) = $57.25m.
* Current mkt cap $141.3m.

Worth keeping an eye out with global steel demand set to continue price pressure on coking coal. Minimal risks as far as I can see - main one would be an initial placement to raise working capital requirements before coal sales turn this into a cash cow.

Be interested to hear people thoughts.

Note it is an illiquid stock and longer term investment. Def would not suit day traders.

I do not own any of these as yet. On my watch list.

Cheers
Bushman
Click to expand...

Actually I have been looking for OPEX information. Can you tell me where you got this number from? In particular I would like to find out whether this $77/ton include transportation to port. TIA. :)
 
lazyfish said:
Actually I have been looking for OPEX information. Can you tell me where you got this number from? In particular I would like to find out whether this $77/ton include transportation to port. TIA. :)
Click to expand...

Hey LF;

From memory is it is from the prospectus listed on the pike river coal website. Google Pike River Coal.

I will have a look when I have a chance too.

Cheers
 
http://www.pike.co.nz/reports/analyst-reports/PRC FINAL 17-Dec-07.pdf/

From the latest McDouall research report, OPEX of $77 NZD/tonne is split as follows:

Mine costs $35
Transport costs $40 **
Other $2

** $40 transport cost per tonne is as per the original prospectus. Since then, a revised coal transport arrangement has been entered into, reducing opex by $1 per tonne. This will lead to an overall cost of production of $76 NZD per tonne.
 
20m share order went through at 90 cps this morning. Wonder who is buying and selling? That sort of amount would have to be one of the cornerstone investors.
 
noirua said:
Just looking at this one more closely after the lift in the share price and particularly the quality of the coking coal, costs and any shipping problems: http://www.pike.co.nz (Having problems with this website, maybe it will get better.)
Click to expand...
Since last posting the website is still very shakey. The company raised $100 million for development and appears to be very determined to get this one moving quickly. Will watch trading and may buy today, on the otherhand I may not.
 
noirua said:
Since last posting the website is still very shakey. The company raised $100 million for development and appears to be very determined to get this one moving quickly. Will watch trading and may buy today, on the otherhand I may not.
Click to expand...
I've probably done the wrong thing buying just a few shares in Pike River Coal. But with all that cash piled up ready, surely with coal prices so high, it's got to be OK. Hasn't it?
 
Looks like you picked it well Noirua.

Things might be coming together nicely for this one with the big increase in coking coal price just as it comes into production.

Looks like a good long term buy, check out the forecast eps for 2010.

Regards
 
michael_selway said:
Hi do they have forecast EPS anywhere for this stock PRC?
thx
MS
http://www.pike.co.nz/reports/analyst-reports/7-Apr-08_PRC.pdf
Click to expand...
Hi m_s, BHP have agreed coking coal prices at US$300 per tonne from April 2008 and this compares to US$98 per tonne for 2007. I doubt anyone can really work out the EPS in these circumstances, and there are many companies wanting a stake in rare Aussie coking coal minnows or mines.
I'm stuck to this one with superglue - good luck
 
Forsyth Barr have had a go at a forward EPS estimate in their research note.

They assume premium hard coking coal prices of US$300/t in the March 2008-09 year and US$190/t in 2009-10, drifting back to US$100/t over the following 3-4 years.

Once in full production in 2009-10 producing 1M tonnes pa, mine life of 18 years, they estimate a EPS of NZD 39.4cents and predict a fully franked dividend of NZD 21.0cents.

I guess unless further resources are identified, which is flagged as a potential outcome, Pike River will essentially be a cash cow and will probably trade a high dividend yield, a little like Jubilee Mines did when Cosmos was their only mining asset. It will all depend on what the company does with the cash it retains.

It's worth noting the valuation sensitivity to both the price of coking coal and the NZD/USD exchange rate.
 
Damn, this is the first time I've seen this thread and PRC has already set sail.

I'm looking for a relatively unknown longer term coal prospect.

Do people think this is still good value? Any other suggestions?

Thanks, Andy
 
RedHerring said:
Forsyth Barr have had a go at a forward EPS estimate in their research note.

They assume premium hard coking coal prices of US$300/t in the March 2008-09 year and US$190/t in 2009-10, drifting back to US$100/t over the following 3-4 years.

Once in full production in 2009-10 producing 1M tonnes pa, mine life of 18 years, they estimate a EPS of NZD 39.4cents and predict a fully franked dividend of NZD 21.0cents.

I guess unless further resources are identified, which is flagged as a potential outcome, Pike River will essentially be a cash cow and will probably trade a high dividend yield, a little like Jubilee Mines did when Cosmos was their only mining asset. It will all depend on what the company does with the cash it retains.

It's worth noting the valuation sensitivity to both the price of coking coal and the NZD/USD exchange rate.
Click to expand...

While analysts forward price forecasts are something to work off, they are notoriously wrong and nearly always underestimate supply pressures and predictions usually end up being way to conservative.

Am watching this one closely.
 
Real1ty said:
While analysts forward price forecasts are something to work off, they are notoriously wrong and nearly always underestimate supply pressures and predictions usually end up being way to conservative.

Am watching this one closely.
Click to expand...
Quite right real1ty, that's been precisely the analysts problems in the last year or so. Infact, looking back at the analysts views its surprising how they downgrade a stock to hold, and then two months later its up 50%, and so it goes on. Their estimates on coal prices have proved as badly wrong as it gets, and still they keep on estimating.

Pike River Coal are now up to $1.30 on the back of booming coking coal prices.
 
AnDy62 said:
Damn, this is the first time I've seen this thread and PRC has already set sail.

I'm looking for a relatively unknown longer term coal prospect.

Do people think this is still good value? Any other suggestions?

Thanks, Andy
Click to expand...

Andy, you might want to check out Gujarat NRE Minerals, GNM.ax - quite unknown, already in coking coal production - starting at 350 000T 2008 -- long term target of 2.5-3 MTPA in 2010-11. Pretty nice development story. Strong indian backing.
 
rafsanjani said:
Andy, you might want to check out Gujarat NRE Minerals, GNM.ax - quite unknown, already in coking coal production - starting at 350 000T 2008 -- long term target of 2.5-3 MTPA in 2010-11. Pretty nice development story. Strong indian backing.
Click to expand...

See PRC 14-Jan-08 Change in Substantial Holding announcement...

Gujarat NRE Coke Limited has transferred its shareholding in Pike River Coal Limited to its wholly owned Australian subsidiary Gujarat NRE Limited.
Click to expand...

A 10% holding in PRC was transferred to GNM (previously INR - listing code change on 8-Feb-08), so you can have an indirect exposure to PRC too ;)

DYOR
 
Hi noirua,

Nice you see you are riding this champion.
I only got on a few weeks ago.
Not complaining though :D
 

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