Ran some numbers with some thoughts.
The run rate is a pretty big miss from the IPO that stated they were meant to be up to 27.5kt per week in July and 30kt per week from August.
The announcement states they expect 1mtpa mining run rate by September, which is just under 20kt per week with upgrades from June next year.
Now to put that in perspective, the IPO estimated costs of $103t this year dropping to the 80s next year. The update doesn't clarify our costs / cost estimates going forward.
However the update does say mining yield is 88% and coking coal component has been 85% of this. It also states our coking coal is tier 2 so we receive a discount to the Platts, but it doesn't say how much. Maybe this is in the IPO but I didn't check.
So say we hit our 1mpta mining run rate by September. 1m / 52 = 19,230t per week. 88% yield = 16,922t coal per week. 85% coking coal = 14,384t coking coal (this % may drop as it was higher than IPO estimate of 80%, so may be short term, yield also slightly higher than IPO).
Cost estimate of $103 per tonne per IPO for 2018. Say we receive $180-200 AUD (after discount, assuming .75c exchange rate) for our coking coal per tonne. Platts has fluctuated around 160-200USD (but we receive a discount, which I haven't got a figure for).
14,384 * 180-200AUD = $2.6m-$2.9m per week before costs. Minus $103AUD per tonne = $1.5m means a range of $1.1m to $1.4mAUD per week gross profit.
Per year that is $57.2m - $72.8m AUD gross profit.
Then we need to add thermal coal, 14,384*15% thermal = 2884t of thermal coal per week. It says we received $90usd per tonne in the recent qtr. So say 2884*120AUD per tonne, minus $103 per tonne cost = $49k per week or $2.5m per year additional gross profit.
We then have CAPEX estimated around $20m for 2018 in IPO, another $20m in 2019. But these are estimates that haven't been re-estimated yet even though the update states they are taking a slightly different approach from IPO that I haven't factored in / researched. Given the run rate estimates missed significantly, should we continue to trust these forecasts?
So assuming they hit the 1mpta run rate from September, and maintain it, after CAPEX estimate of $20m I estimate a range of $37.2m-52.8m EBITDA. This doesn't factor the lower run rate July to September as they increase their production but I didn't add thermal coal sales to the figure as an offset.
Fluctuations in Platts, our discount, AUD, mining yield, coking coal yield, other mining issues on site will impact these estimates. I may have also made some mistakes in my estimates, treatment of yield or other calculations.
So to those wondering why the SP took a hit yesterday, the significant change in mining run rate has significant impact on gross profit and exposes us to future movements in coking coal prices more so than if production was ramped up now.
The miss also increases the risk of other estimates needing revision as mining approach slightly altered (may not be an issue), and generally whether the pre IPO estimates for costs etc should still be believed since we have not been told about actual costs compared to forecasts yet.
I think we'll see some further downward pressure on the SP, though suspect we will see it move back up when management disclose underlying costs per tonne and also CAPEX estimates are disclosed to the market.
If you're bullish on coking coal prices, then this still seems like fair value to me. But the uncertainty around price received, future coking coal prices, production costs, capex etc will lead to varied opinions of what fair value is and where the SP is in relation to it.
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