Coal Boom Strains Showadmin
July 27, 2006 Filed Under: Coal Mining, Mining Services
A mixed day yesterday for some locally owned coal miners with Excel Coal Co confirming the rightness of the $1.8 billion offer from Peabody of the US, Centennial and Macarthur Coal both showing the strains of operating in a resources boom.
Centennial said it has cut its 2006 profit estimate 20 per cent or more; from between $20 and $26 million to an anticipated post tax earnings of between $16 and $17.5 million.
It was the third downgrade in a year and opens the company up to the prospect that it will join Excel as a takeover target for an acquisitive group with cash.
But Centennial shares rose 5c to $3.58 as the company against disappointed: the low end of the forecast, $16 million, is less than half last year’s profit. The company’s shares are around 38 per cent down on the all time high of August 2005.
The company blamed continuing delays with the relocation of the Newstan longwall which is taking longer than originally planned and slower progress through a localised zone of poor roof conditions at Tahmoor during June.
The Newstan operation will lose an estimated $48 million: it was only five months that Centennial was forecasting that earnings would be much higher than 2005’s $35.9 million.
Not surprisingly, Centennial has short-listed a group of companies interested in buying Newstan and four other mines in the area.
In Queensland it was a similar sort of problem for Macarthur Coal with delays at the Dalrymple Bay export loading facility the reason why annual sales fell almost two per cent to 4.93 million tonnes.
But the company said the sales figure was actually 10 per cent above the 4.5 million tonnes it had set itself as a target and Macarthur said it would again target sales of 4.5 million tonnes in 2006/07.
“Macarthur Coal will face an increased hurdle in exceeding its 4.5 million tonne annual target as the Dalrymple Bay Coal Terminal (DBCT) expansion work is expected to temporarily decrease capacity early in the 2007 calendar year,” the company said.
The company said it had minimised the impact of a drop in demand for PCI coal by boosting sales of thermal coal and trialling sales of coking coal.
Macarthur Coal expects coking coal prices to stay high in the third quarter of calendar 2006 after a strong increase in steel prices.
“Coke prices, which have moved up to $US195.00 per tonne, are also expected to strengthen demand for metallurgical coal although increasing steel exports from China may dampen Western World steel demand and prices in the medium.
And Excel Coal Limited (ASX: EXL.ax) said it had achieved record coal production and sales in both the fourth quarter and for the financial year to June 2006.
The company said it was sticking to previous guidance of $95 million to $100 million in net earnings for the year to June,
Annual sales of 6.2 million tonnes was 29 per cent up on the previous year, reflecting the increased production and a heavy shipping schedule from all mines in the final quarter (a nice end of year boost).
Saleable coal 2006 of 5.9 million tonnes was 18 per cent higher than in 2005, reflecting the Wambo expansion and a second mining unit at the Chain Valley mine near Newcastle.
And that’s why Peabody of the US snapped up Excel in an agreed bid six weeks or so ago: it’s a well run company with solid mining assets and reasonable exporting access.
Macarthur is controlled by CEO Ken Talbot and associated interests and they would be looking at the price Peabody is paying the six or so executives and other board members who control Excel and would know if they wait until Dalrymple Bay is expanded, then they have a good chance of getting the show back on the road.
Centennial has a lot of work to do but with a fairly open register, it’s being given another chance by investors.
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