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Financing for the construction of a new mine
At the end of the third quarter of 2018, JSW had PLN 2.4 billion in cash and PLN 724 million in loans, borrowings and bonds. In addition, the company had PLN 1.5 billion in the stabilization fund. The high prices of coking coal maintained in the fourth quarter of 2018 and at the beginning of 2019 will certainly keep the company's high profitability and, therefore, have the potential to increase cash in the company at least at the beginning of this year.
This time, the government, basing on the bad experiences of companies from the past (resulting, among others, from the high economic situation in global coal prices), is trying to build up financing for new, strategic investments with a greater capital reserve. These include the construction of the new Jan Karski mine in the Lublin Coal Basin and the start of use of the Debiensko deposit, which is adjacent to the Szczyglowice infrastructure.
The concessions for these two deposits are now held by the Australian Prairie Mining, with which JSW has been negotiating the acquisition terms for a long time. It seems that the acquisition is only a matter of time and price. JSW has the possibility of taking over the whole company by calling. The current capitalization of Prairie on the stock exchange is around PLN 200 million, but the price may include the premium for taking control.
The second option is buying back individual projects. Then JSW will have to invest very large amounts of money for the construction of mining infrastructure. The new Jan Karski mine may cost several billion zlotys. In Debiensk, however, you will not have to start from scratch, because the use of these resources can be started without the need to build a new shaft using the infrastructure of Szczyglowice. In addition to potential expenses for new projects, JSW will carry out other investments estimated at PLN 1.4 billion annually, compared to an annual depreciation of approx. PLN 800 million.
"By the end of the week, we will release a message about further steps, but realistically it is a matter of several months, with approval and corporate consent, so that we will be able to develop a structure [transaction]," said Ozon in a conversation with Parkiet TV.
"The conversations between companies are purely business and I think that we can work out a solution that would make arbitration unattended," the president also pointed out.
Earlier in February, Prairie formally informed the Polish government that a dispute arose in connection with the Polish authorities taking actions violating the Energy Charter Treaty and bilateral investment protection agreements signed by Poland with the United Kingdom and Australia. The company said that it counts on an amicable settlement of the dispute, but takes arbitrage into account.
So at 25 Feb new JSW statement extending negotiating position with Prairie to Sept 2019. Expect RNS.