Coal Energy increases coal production 28% yoy in July-October 2012

Coal Energy (CLE PW) kept monthly mining almost flat in October at 155.9 kt, the company reported on Nov. 15. Thermal coal extraction slid 1% mom, while coking coal mining grew 6% mom. The saleable coal output from waste recovery was cut 93% mom to 2.9 kt, owing to a suspension of operations at an old beneficiation plant. Coal production from the latter will be replaced by product from its new enrichment facility, launched in mid-October. Its ramp up to full capacity load may continue through the beginning of January 2013. In 4MFY13, Coal Energy increased coal mining 22% yoy to 632 kt and boosted total coal production 28% yoy to 755 kt.

Roman Topolyuk: Coal Energy kept underground mining volumes stable in October, despite difficult market conditions, and even restored its extraction of coking coal, which lagged in September. We estimate that production losses in waste recovery, caused by a switch to a new facility, may bring up to a third in declines in quarterly EBITDA in 2QFY13, depending on the ramp-up pace of the new facility. However, this dip can be counterbalanced by selling coal products from stockpiles. As of June 2012, the company accumulated at least 120 kt of finished coal stockpiles, we estimate, and we don’t expect to see spurring sales out of inventories in 1QFY13, which will be published next week.