Sharechat Logo

Daily ShareChat: Pike River Coal

By Jenny Ruth

Tuesday 2nd November 2010 1 Comment

Text too small?
 Jenny Ruth

Pike River Coal's production downgrade is much more severe than analysts had anticipated, says Craigs Investment Partners.

Last month, management again downgraded its production estimate for the year ending June 2011 from 620,000 tonnes to about 340,000 tonnes.

"We had anticipated 500,000 tonnes and factoring in the new expectation halves our EBITDA (earnings before interest, tax, depreciation and amortisation) estimate for 2011 to $31 million," Craigs says.

That compares with Pike's $40 million EBITDA loss in the year ended June this year. Craigs is forecasting EBITDA will rise to $181 million in 2012 and to $237 million the following year. That assumes Pike's steady-state production rate will be 920,000 tonnes a year.

It notes Pike still needs to refinance its $25 million loan from major shareholder New Zealand Oil & Gas before December 15. Pike intends to make an announcement on this some time in November.

Craigs lists key downside risks to its $1.29 target price for Pike shares as the company being unable to raise debt financing to meet cashflow requirements, falling coal prices, a negative assessment of its reserves, further production delays or a failure to meet production forecasts, breaches of resource consent limiting production and an increase in extraction costs.

Recommendation: buy (up from hold, reflecting the steep fall in the share price).



  General Finance Advertising    

Comments from our readers

On 2 November 2010 at 10:05 am paul said:
continues to disppoint but see a huge future if they can get things right....hopefully the bad news is behind us
Add your comment:
Your name:
Your email:
Not displayed to the public
Comment:
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:

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
Daily ShareChat: Pike River Coal
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