Sadovaya shifts expected recovery in sales to April

Sadovaya Group (SGR PW) sold 1.7 kt of coal in February, according to the company’s monthly update. Sadovaya recycled 1.9 kt of coal waste and mined no coal in February. Coal demand was weak in March, which triggered delays in contracting with key buyers, the company said. It expects 25-30 kt in coal sales in April, the volume previously expected for March.

Roman Topolyuk: Sadovaya fell short of meeting its previous guidance of selling 5 kt of coal in February and probably will report minor sales in March, as the tone of the latest report suggests. Selling 25-30 kt in April remains at risk as well, considering that the market is showing little signs of revival: stockpiles of steam coal remain elevated, as power production from coal (-15% yoy in 2M13) fell faster than mining of steam coal (-7% yoy in 2M13).

Sadovaya’s finished coal inventories are still at a high level of 90 kt, we estimate, triple the suggested April sales volume. Reprocessing of just 1.9 kt of waste (out of a 75-kt monthly throughput capacity) hints that the new coal beneficiation facility continues to operate in testing mode.