5 Sep 2017 07:15
Prairie Mining - Initiation of Coverage. Conviction Buy. Target price 118p
"Under the radar" potential world-class hard coking coal supplier with two low-cost projects in Poland to supply Europe's leading steel makers & a likely acquisition target
Prairie Mining listed in London in 2015 to bring its hard coking coal interests in Poland to the attention of European investors. The company is currently moving its two-impressive large Tier-1 low-cost coking coal projects towards production as early as 2023.
- Enviable high margin projects at currently strong coking coal prices
Prairie is continuing to advance its two projects towards production and has a world-class partner in China Coal, the second largest coal miner in China. In the current strong coking coal price environment, Prairie looks likely to be an M&A target in our opinion as majors are seeking such world class Tier-1 projects and midcap producers need growth options.
- Close to Europe's steel makers who rely on imports for 85% of supplies
Europe is a big importer of coking coal from Australia and the US. Coking coal from Prairie's low-cost Polish projects should attract a premium price due to its quality comparable to coal produced by the majors and far lower transportation costs being on the doorstep of big European steel makers.
- Management has proven expertise in project development & financing
CEO Ben Stoikovich is an ex-BHP coal mining engineer/investment banker whose skills have helped get Prairie where it is today. Managing operations in Poland is Miroslaw Taras, the ex-CEO of the neighbouring Bogdanka coal mine which he turned into Europe's lowest cost coal producer.
- DCF analysis reveals potential upside of 250%
Discounting forecast cash flows from the two planned coking coal mines and assigning what we consider to be highly conservative risk factors gives a target price of 118p. We thus initiate coverage of Prairie Mining with a Conviction Buy stance.
To read the full note visit http://www.alignresearch.co.uk/cpt-company/prairie-mining/