Sharechat Logo

Daily ShareChat: Pike River Coal

By Jenny Ruth

Tuesday 10th August 2010

Text too small?
 Jenny Ruth

Pike River Coal's fourth quarter activities report and the rate at which it is burning cash was a negative surprise and highlights the company may have to find more cash, says Andrew Harvey-Green, an analyst at Forsyth Barr.

"Cash burn for the fourth quarter was $23.3 million, a monthly rate of $7.8 million. If that rate was to continue and the next coal shipment was delayed three weeks, cash will run out in September," Harvey-Green says.

"It is therefore crucial that Pike ramps up production as profiled." At current coal prices of about US$180 (NZ$247.52) to US$190 a metric tonne, and the current cash burn rate, Pike needs to sell more than 30,000 tonnes a month to be cashflow break even, he says.

Still, he doesn't expect yet another capital raising because the company is throwing a lot of resource at getting production rates up and, once it starts hydro mining, "30,000 tonnes per month should be easy. Any cashflow shortfall is therefore likely to be short lived and less than $5 million, assuming coal prices do not materially fall further."

Reasons to be concerned are the company delayed its second coal shipment by about a month and its planned start to hydro mining in mid-September is also a little later than expected. "These delays, while minor compared to past delays, highlight that Pike is yet to get on top of its operational forecasting."

Recommendation: Accumulate.

  General Finance Advertising    

Comments from our readers

No comments yet

Add your comment:
Your name:
Your email:
Not displayed to the public
Comments to Sharechat go through an approval process. Comments which are defamatory, abusive or in some way deemed inappropriate will not be approved. It is allowable to use some form of non-de-plume for your name, however we recommend real email addresses are used. Comments from free email addresses such as Gmail, Yahoo, Hotmail, etc may not be approved.

Related News:

Daily ShareChat: Pike River Coal
Pike River cuts production forecast, shares tumble near month-low
Pike River gains $25m short-term facility from NZOG
Pike River seeks short-term funding
Pike River announces new CEO
Pike River CEO steps down, shares fall
Pike River loss widens ahead of mining
MARKET CLOSE: NZ stocks rise; Pike River leads gains
Pike River gets first $10 million away no trouble
Pike River Coal to mine investors for more equity