JSW Soars 26% as Coal Market Outlook Boosts Miner’s Overhaul

  • Shares in Polish coal producer jump amid surging coal prices
  • JSW signs deal with creditors, may postpone share sale

JSW SA surged to a two-year high on Tuesday after Poland’s biggest coking coal producer outlined its investment and cost-cutting plans, delaying a share sale until at least early next year.

The stock jumped as much as 26 percent and climbed 24 percent to 39.17 zloty as of 2:51 p.m. in Warsaw, the highest since Aug. 2014. The state-controlled company is the top performer in the Warsaw’s WIG30 Index’s this year with a 268 percent gain.

JSW doesn’t plan to sell shares this year and will look into a possible offering at the start of 2017, Chief Financial Officer Robert Ostrowski said at a news conference in Warsaw on Tuesday. Even though the capital increase is the miner’s base-case scenario, it will hinge on coking coal price, according to the CFO.

JSW will balance its cash flows at a price of $100 a ton, but it needs an additional cash cushion, he said. The Steel Index coking coal price rose to $138.2 a ton, highest since Dec. 2013.

Premium hard coking coal Australia export compiled by The Steel Index Ltd.

JSW may not need to raise funding through the share issue if coking coal prices stay at current levels, according to Pawel Puchalski, an analyst at Bank Zachodni WBK SA.

“Unless the coking coal market collapses by the time the company decides on the share sale, the offering will remain hypothetical,” he said in Warsaw. And even if the company continues with the capital increase, “the market has already priced that in.”

Relatively low planned annual investments of 900 million zloty to 1 billion zloty give the company a “great growth potential,” freeing up its cash reserves, while the increase of a more profitable coking coal production in its mix to as much as 86 percent from 73 percent is also “positive,” Zachodni’s Puchalski said.

Supporting Tailwind

JSW is one of the three Polish state coal producers that have been going through difficulties since at least 2014 as global prices of the fuel dropped, while the companies were left with high production costs mainly linked with labor. The miner suspended some benefits for workers through 2018, agreed to sell coking and power units and negotiated a five-year repayment extension to its 2020 bonds.

The company assumes the potential share sale will be in the range of 500 million zloty to 800 million zloty and the State Treasury’s stake won’t drop below 34 percent from 55 percent currently. The two other coal producers, which focus on cheaper thermal coal, needed a rescue from their state-controlled companies.

JSW expects “a positive market reaction” if it decides to proceed with the offering, the CFO said.

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