Sadovayas coal sales fall 36% yoy in 2M12

Sadovaya Group (SGR PW) reported yesterday a 36% yoy decrease in coal sales to 119 kt in 2M12, while its mining output grew 7% yoy to 63 kt. In February alone, coal sales increased by 4% mom to 61 kt, but mining was down 26% mom to 27 kt. The drop in mining was driven by a decrease in coal extraction at Sadovaya Mine due to repairs that were finished in late February. According to the company, resources at one of the longwalls at the Rassvet-1 Mine are close to depletion and the longwall will be closed shortly.

Roman Topolyuk: We expect Sadovaya Mine will return to normal output volumes in March (23-27 kt per month observed in September-December 2011). Subsidiary Rassvet-1 Mine, meanwhile, is likely to experience a short-term drop in mining output due to depletion of the longwall, while mining operations should be resorted in coming months on new longwall commissioning. All in all, Sadovaya Group is very likely to decrease its coal output and sales yoy in 1H12, though we expect this will be more than compensated for by growth in coal sales sourced from the upcoming EBRD-financed waste enrichment project in 2H12.