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Czech Government Sends Conflicting Messages on NWR Mine

The Czech government hasn’t agreed on extending aid to NWR’s unprofitable Paskov mine, Industry and Trade Minister Jan Mladek said, contradicting a statement from Finance Minister Andrej Babis that a deal had been reached.

Mladek’s said assistance would have to reflect declining coal prices a day after Babis said he had negotiated an package of 600 million koruna ($30 million) in exchange for NWR keeping the mine running until 2017. A final deal, which both sides aim to reach by end April, could be different both in terms of the amount and the time, Mladek said today.

“The finance minister said yesterday that everything is settled,” Mladek said at a press briefing with NWR Chairman Gareth Penny in Prague. “Unfortunately I have to say that it’s not settled. NWR wants to have a guarantee that if coal prices continue to fall, that will be reflected in the government’s aid package.”

The conflicting messages have added to volatility in NWR’s shares and highlight simmering tension among the members in the three party ruling coalition. They have faced off on health-care, welfare and infrastructure spending ahead of talks due to start tomorrow on next year’s budget.

NWR shares swung to a 3.2 percent gain yesterday from an earlier 7.5 percent decline after Babis said he had reached an agreement with Penny on Paskov. The stock rallied another 3.1 percent this morning, only to be knocked down 3.5 percent by Mladek’s statement that the deal hadn’t been finalized.

NWR, which has posted losses for five quarters, originally pledged to shut Paskov down at the end of 2014 because the mine loses as much as $80 million a year. The company is undergoing a capital review and expects a significant decrease in its “economically mineable” reserves, it said in January.

The industry and finance ministers will discuss the Paskov aid package on April 11, Mladek said.

“The extension of mining at the most costly mine until 2017 will mean a negative impact on the earnings of the company and the burning of much-needed cash,” analyst Bohumil Trampota at J&T Banka AS in Prague wrote in a report to clients today. “We consider the news negative because it would mean additional expenses for NWR compared to the original plan.”

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