Bathurst Resources' coal mining JV with Talleys drive surge in first-half operating profit
By Jonathan Underhill
March 1 (BusinessDesk) - Bathurst Resources turned to a profit from ordinary activities in its first-half thanks to the contribution of four months of earnings from its joint venture with Talley's Group, which took control of Solid Energy facilities including the Stockton mine last September.
Profit from ordinary activities was $19.7 million in the six months ended Dec. 31 from a year-earlier loss of $1.2 million, the company said in a statement. Sales rose 15 percent to $24.7 million. On a net basis, it posted a loss of $12 million from a year-earlier loss of $11 million, mainly reflecting a decrease in the fair value of derivatives and borrowings and higher finance costs after it sold convertible notes and preference shares to repay existing debt and help fund the BT Mining investment.
The results include $22.3 million profit from Bathurst's 65 percent-owned BT Mining, the venture with diversified food group Talley's that acquired failed state-owned miner Solid Energy's Stockton, Rotowaro and Maramarua mines and other properties for as much as $96 million. It took control of the mines on Sept. 1 in a deal it estimated would lift production by 1.8 million tonnes a year to 2.2 million tonnes. Of that 1.7 million tonnes is steelmaking, or coking coal. Stockton's rail link runs to Lyttleton Port and it has existing steelmaker customers in India and Japan.
"BT Mining has recorded outstanding results for its first four months of operations, allowing Bathurst to take full benefit of the favourable international hard coking coal prices," it said.
Citibank analysts revised up their forecasts for benchmark coking coal for 2019, which it has reaching US$225 a tonne in the first quarter of this year before retreating to US$150 a tonne in the first quarter of 2019. They expect limited growth in Chinese coal production will underpin prices for both coking and thermal coal in the next two years.
Production from Bathurst and BT Mining was 856 kilotonnes in the first half from 166kt for Bathurst alone a year earlier.
The output from Stockton exceeded budget in its first four months. Of its other export mines, the Buller operations at cascade and Escarpment remain in care and maintenance.
Of its domestic coal facilities, output in Canterbury was hurt by bad weather in the first quarter which meant resources had to be diverted to sediment control and as a result production was behind budget, it said. Poor weather also disrupted production at Maramarua, which was also contending with a "known fault which was found to be lying at a flatter angle than modelled." Production at Rotowaro was above budget for the four months and output at Takitimu was in line with budget, it said.
Bathurst's investment in Stockton was in part driven by its infrastructure, which is strategically placed to service its Buller Coal Project, a rail link to Lyttleton Port and existing steelmaker customers in India and Japan. At present Stockton's coal washery is taken up with the output from Stockton but in three years it would be capable of handling coal from other parts of the Buller Coal Project.
The improvement in coal prices means BT Mining faces a much more favourable market than what Solid Energy struggled with before the SOE failed. Solid Energy sold 3.5 million tonnes of coal from Stockton in 2014 and generated earnings before interest, tax, depreciation, amortisation and changes to financial instruments of just $15.9 million on an operating margin of 4 percent. It also took a $105 million impairment against Stockton. That was the last year it separately disclosed Stockton's earnings but it cut output and jobs the following two years as prices tumbled.
Bathurst shares last traded at 17 Australian cents on the ASX and have soared 150 percent in the past 12 months.