Coal Energy doubles monthly mining in November

Steam coal miner Coal Energy (CLE PW) reported 10.5 kt of coal production in November. Although it’s an 84% drop on a yoy basis, it marks a third consecutive month of increased mining volume since a historical low of 2.1 kt reached in August, with production more than doubling from October. At the same time, the production of thermal coal and processing of waste remain on hold due to dangerous working conditions for employees, the company said. The November results imply that Coal Energy produced 30 kt of coal in 5MFY15, down 91% yoy.

Roman Topolyuk: Coal Energy is continuing a gradual recovery in monthly coal production volumes, but its operating performance doesn’t provide much optimism as it will not enable the company to cover fixed costs. November production was only 5% of the volume reached in August 2012, when coal production peaked. About 80% of the company’s capacities are located in the territories of Donbas occupied by separatists, which has ruined Coal Energy’s ability to safely operate those mines. Moreover, Ukrainian officials have not yet allowed consumers to purchase coal from the occupied territories, so as to not finance terrorist organizations. Therefore, we maintain our bearish view on Coal Energy.