UK Coal Share Discussion Threads

[semper vigilans] 14/3/2012 10:17

CT - makes you wonder why these management guys with decent CVs bothered signing up?

Maybe they are trying to take the mining and property out on the cheap and ditch the pensions issue. Don't see Peel taking it lying down.

[castleford tiger] 14/3/2012 10:04

Got a few at 18p this morning as a daft punt.
No idea whats happening here.

UKC could be bluffing?

Tiger

[semper vigilans] 14/3/2012 10:03

I am I correct in assuming that the management will soon be Lloyds Bank employees?

[punkyted] 14/3/2012 09:58

Real shame. Drift sub 20p looms

[angus17] 14/3/2012 09:41

mj19

if somebody could tell us the exact pension fund deficit then it would help. Irrespective of other problems UKC has a public sector pensions defict but is a small plc.

I,m afraid the other problems are a sideline until this is put to bed.

What is a bit worrying is that they say that if the reorganisations goes ahead it may lead to a dilution in shareholder value. Which begs the question what willhappen if they don't!

[mj19] 14/3/2012 09:31

what price is fair value for the shareprice?

[strutt12] 14/3/2012 08:19

At what price then????? Some will know!!!

[kalkanite] 14/3/2012 07:09

Well, that humble pie didn;t taste too good. I wont be able to eat for a week!

[warbaby43] 13/3/2012 11:25

Kalkanite, the tonnage figures I provided on 29th February were not estimates but actual pit production figures sourced from "Coal UK" the industry's publication of record which collates and publishes each month a myriad of statistics including domestic production, imports, ports, manpower, consumption and power generation. Of necessity such information is historical, so the next figures I will be able to provide will be those for February appearing in the edition due at the end of March.

Until those figures appear and until it becomes clearer what has been happening and what is happening at Daw Mill, I would not begin to hazard a guess at what H1 production might might be.

What I would also throw into the equation is that the backdrop to all this is David Brocksom's negotiations with the banks over the renewal of UKC's facilities and that any major change in the status of Daw Mill might well act as the spur for the restructuring of the company that has long been considered a possiblity by at least a number of shareholders. Interesting business as always, UKC.

[kalkanite] 13/3/2012 07:34

Careful Warbaby, me thinks you are in danger of assuming your own estimates of production are the all seeing and knowing ones. Your Coventry article is clearly wrong dated news unless you believe the Jan 23rd RNS release by UK Coal to be inaccurate.

I thank you for the info regarding European pricing, I do find it frustrating not being able to find current pricing. My mix up on the report

Always good to read your insights on this company, but in the meantime we will agree to disagree on production estimates. I would like to know your estimates fot 2012 H1 so that the victor can toast a virtual beer.

Cheers

K

[warbaby43] 12/3/2012 19:49

Careful, Kalkanite, you are getting some figures muxed ip, I think. The indicative contract prices we both refer to are from the 2010 Annual Report published in April 2011 - the 2011 Annual Report has not yet been published.

With regard to the coal prices referred to, we have a case of chalk and cheese. The one you have chosen, as made explicit by the link, is that for FOB Newcastle Australia but the one applicable to UKC is the European price usually termed Des ARA - ie CIF Amsterdam, Rotterdam, Antwerp, the main continental import ports. The ARA price is also often referred to as API2 - what, if any, and why the difference is, nobody has ever been able to explain.

Unfortunately, I cannot provide a link as the futures section of the Global Coal site is subscription only. However, if you register with the Global Coal site, you can view historical price data up to January of this year for the three indices - Newcastle, ARA and Richards Bay, S Africa.

On Daw Mill, this face has long been known to be a difficult one, but the length of delay in its development, six months late, probably indicates that the difficulty is even greater than originally envisaged. Throw in D Mill's very high costs of £2m + pw and the scale of the problem becomes clear.

[kalkanite] 12/3/2012 17:53

Hi Warbaby

Thank you for your reply, however you appear to be playing with some old news!

First you use the 2010 annual report for your contractual figures, I have used the 2011 annual report figures which are surely more accurate and pertinent.

Second the "future of Daw Mill colliery" report whilst dated 19th Jan is clearly outdated, it talks about "Negotiations with the union at the centre of the pay dispute, the Union of Democratic Mineworkers, are ongoing". The Jan 23rd trading statement states "In December, we concluded negotiations and reached an agreement on pay and working practices with our workforce and their unions".

We do agree that the poor 2011 H2 was due to working through an extended face at Daw Mill to negate a face gap, which fell short with negligible production in Dec before the new face ramping up in Jan.

The $109 quoted in my calculations come from the link below .....



The price has slipped just over $1 over the weekend and is in US$. If this is inaccurate could you please provide a link to your source?

K

[kalkanite] 12/3/2012 08:44

Copied from TMF



I thought that I would put a few figures together to try and work out roughly what turnover we can expect from the first 6 months of 2012.

The prevailing coal price has moved lower recently and is currently $109, given a £/$ ratio of around 1.56 this would imply a price of around £69/Tonne. UK Coal averaged 24GJ/Tonne for 2010 which would therefore imply a price of £2.91/GJ, but we are contracted to supply some coal at varying rates.

OK, so using this figure we can extrapolate (using the table in the 2011 final report) an average price for contracted coal in 2012 to be about £2.75/GJ. So we have contracted price of £2.75/GJ and open market price of £2.91/GJ, let's say an average of £2.80 to be on the safe side, this compares very favourably to an average of £2.37/GJ during the first 6 months of 2011 an increase of around 18%.

First 6 months of 2011 produced 4.2m Tonnes of coal, however this January's production figures were poor due to the ramping up of the new face at Daw Mill but I expect everything will have been back on track by end of Feb. It appears that the new face will be more difficult to mine, however the recent (hard fought) wage settlement which offered just over 4% per year for the next 2 years (from memory) will have yielded (imo) significant terms and conditions in favour of the company, why else would this offer had been rejected in this current climate? The change of terms and conditions to working practices are high up on the agenda for the 3 year turnaround plan.

Given the above and providing no unexpected events I think it fair to assume a production level of circa 3.9mT for the first half of 2012. This gives a turnover of £262.1m for coal sales (2.8*24*3.9m), which compares to a turnover in 2011 of £256.08m of which £253.424m from sale of goods, remember, the cost of the wage rise for this and next year has been absorbed by the concessions won over the pension agreement so labour costs will not have risen since last year.

I have made the same calculations assuming coal prices of $100 and $120 to give turnover (assuming GBP/$ rate stays the same and that 3.9mT is produced/sold) as follows:

Turn over @ $100/T will be £247.1m

Turnover @ $109/T (current price) £262.1m

Turnover @ $120/T will be £281m

So we can conclude that the profit after tax in the first 6 months of 2011 of £22.2m and EPS of 7.2p ought to be improved should the price of coal stay above $100/T for the year and by a fair margin if prices remain at $109/T or above.........

Except that things are not that simple, unexpected events can occur, GBP/$ rate and coal sale price will fluctuate, diesel cost varies and we don't really know what extra investment "may" be required to extract the resources.

First quarter figures ought to be released in the April finals, I look forward to seeing how we are progressing.

PS last year average coal price was between $125 and $130, so shows what a difference getting rid of most of the dreaded legacy contracts has done!

As always DYOR

Good luck all

K

Fwd indicative contractual prices can be found here......

[kalkanite] 29/2/2012 15:56

The Daw Mill Jan figures are not a good indicator as the old face had finished in Dec and the new "ramping up" in January. I'm confident that Feb will give a much better indicator of things to come.

[warbaby43] 29/2/2012 15:01

Pit production figures for January from "Coal UK":

Kellingley 132,874 tonnes
Thoresby 63,324
Daw Mill 55,933

As we are all painfully aware, UK Coal is a very high cost producer and with Daw Mill's costs being of the order of £9m per month, this wretched January production figure of 56k at a sales price probably around £64 per tonne underlines the doubt there must be over the pit's survival.

It almost broke the company in Q1 2010 and its losses then account for a substantial part of the current debt now. Leaching money at the rate of around £5m per month is not, therefore, sustainable so unless there is, by the end of March, either a huge reduction in running costs or a very large increase in production, Daw Mill would appear to have no future in its present form.

However, with 20mt of reserves and a further 40mt of potential resources, it does represent a considerable asset with the investigation and analysis of the available, alternative options for exploiting that asset likely to be exercising the minds of management, Board and advisers over these weeks.

[argylerich] 27/2/2012 17:13

Somebody has taken a buy position...

[jacks13] 22/2/2012 12:57

Thanks, it's the fast diminishing brain cells to blame! :-(

I hope they weren't fatalities, they were reported as burns injuries at the time. On the subject though the Kellingly incident has gone quiet.

[warbaby43] 22/2/2012 11:34

Jacks, to put your mind at rest, your memory might be playing you false as the New Year fire was in a sub station at the now closed down Welbeck with the fatalities being two security guards. What and why they were doing there can only be a matter of conjecture but this time even the HSE will have a hard job to pin anything on UKC.

[kalkanite] 22/2/2012 08:49

Warbaby

I have to agree with your statement. Looking to the future UKC needs to have a vision beyond deep mining. Clearly there is much scope in the property side

"14,000 residential plots being promoted through the planning system"

"9m sq ft of employment space being promoted through the planning system"

Add to this the current 11 business parks and other land and you have an excellent property portfolio.

To compliment the property side UKC needs to develop its energy portfolio. It has already identified joint ventures with members of the Peel group to develop waste facilities on 11 properties within the Group's Harworth Estate portfolio. There are from the website "14 existing wind farm opportunities" to pursue, not sure if this is a land lease project or whether Peel/UKC will develop/own the wind farm outright. The MOM with Linc Energy may yield more prospects, although I wouldn't attribute any value to this at this stage.

I think that keeping Harworth power would demonstrate a direction for the future and complement the other projects in the pipeline.

With average pretax profit forecasts for 2012 of £45.6m, conditional sale of consented build land for £18m, it would not take much to bring the debt down to a manageable level by the end of this year, without the sale of Harworth Power.

I think UKC could eventually be bought out by the Peel group (who already own 29%) once the debt and coal operations are sorted, with the purchase price being substantially above the current 30p.

All imho.
K

[jacks13] 19/2/2012 15:17

Sale of the business needn't be a bad thing provided we get a fair price, more significant would be the loss of expertise and skills within the business, if they exist.

What is more alarming, and this may be your main concern, is if UK Coal is turning its back on the potential to develop the coal bed methane deposits it owns. I'm not sure this is the case though. Haven't they got an agreement with an Australian company to evaluate the deposits using an in-situ process to extract the gas?

It would be sufficient surely to just produce the gas. UK Coal doesn't need to own power plants and tranmission lines. That would also involve large capital expenditure on a par with sinking new mineshafts.

p.s. We've heard no more about that electrical fire on New Year's Day at Kellingly.

[muckshifter] 07/2/2012 17:46

Hello kalkanite,
Just read your TMF post, which I liked, and hope you win the competition, as I have a few UKC shares.

I'm impressed by the current management, who at long last appear to be attempting to grasp the nettle at UKC, but I fear they may be too late in terms of deep mines. However, their systematic and logical plans for the property side and the opencast coal side, should at least give the company a future.

The "recently recruited management argument" doesn't convince me in terms of deep mines, as only one of the recent recruits is effectively staking his future on UKC deep mines, and he comes from Anglo-American, AIUI. There are many possible reasons why even a relatively short spell at UKC during its short term deep mine recovery might be attractive to him.

My expectation is that deep mining is unlikely to survive more than the next five years, and I would be astonished if it reached 2020. Opencast will almost certainly never achieve the sort of historic profit levels it achieved in the past, but should be profitable and may manage to increase output by say 50% in the future. Unfortunately the short term nature, combined with the small number of current opencast sites, and applications, makes the division much more vulnerable to serious cashflow fluctuations, which are not popular with banks, shareholders, etc.

Unless someone finds a financially viable use for CO2, I don't think CCS will happen - which I believe is tacitly acknowleged in the quotes you give in your post. AFAIAA there isn't a commercially viable CCS scheme anywhere despite years and years of discussion. But if someone did crack the CO2 "value" problem it would need to be very soon for us.

Don't believe coal gasification, or anything of that insitu nature will help UKC. If you look in detail at the plans of the existing and mothballed, but still accessible, collieries they all seem to have "borders" defined by old workings of nearby collieries, known areas of significant geological faulting or seam splitting etc virtually enclosing them.

So, I think your competition entry is a good one in that the next year should (fingers crossed) be the one where the recovery is finally noticed, but then again I thought that would be 2011 when I bought shares, after many sceptical years, late in 2010.
Regards.

[loafofbread] 07/2/2012 15:04

Of interest ATH may be in play.

Peter Gyllenhammer just taken a 20% stake. Activist investor who bought in during last years failed bid talks with HG.

Might be worth watching.