Buy note with 90p target2 Mar 2017 12:55
Prairie Mining (PDZ.L)
Buy at 27p
Target Price: 90p
Prairie owns two coking coal projects in Poland, both of which have the potential to become tier one mines. Jan Karski is semi-soft coking, Debiensko is premium hard-coking. Both projects will supply the European steel industry and benefit from high-value coal, very high margins, existing infrastructure (e.g. rail) and established regional markets.
In terms of project economics, both Jan Karski and Debiensko are expected to produce excellent long-term returns, something which is not reflected in Prairie’s £41m market cap. Jan Karski’s prefeasibility study showed a >25 year mine life, a post tax NPV8 of $1.4 billion and a 26% IRR. Debiensko’s value is also not remotely reflected in the current share price. A scoping study is due later this month which should act as a major catalyst. Meanwhile, our Debiensko model produces an NPV8 of circa US$750m and a 23% IRR.
A key element to realizing Prairie’s value is de-risking through bankable project studies, culminating in mine construction. The excellent returns and strategic importance of both projects should ensure they get financed. Prairie’s management is dominated by very experienced international and Polish coal mine builders and operators. We see limited downside risk to Prairie and believe it has slipped through the net. We initiate coverage with a BUY and 90p TP. Read the full report...
https://www.**********************/img/pdfs/research/prairiemining010317.pdf