Since mid-May, when you could have snapped up a parcel of Austral for 48c, the stock has risen to around 77c, a 60% rise in a matter of weeks. Driving the new-found interest in Austral are the twin effects of strong Asian demand for coal, and an expectation that Austral has put problems at its Tahmoor mine behind it.
Austral says it has successfully made the move from Tahmoor to the nearby Tahmoor North mine where a thicker seam of Bulli coking coal will boost production and make underground operations much easier. Chairman Vince Pendal told the Austral annual meeting in May that Tahmoor North contained a seam greater than 2m thick, compared with the 1.6-2m seam at Tahmoor.
He might have added that Austral is delighted to see the last of Tahmoor. Difficult underground conditions, mechanical failures and roof problems saw production virtually dry up in the first few months of the year.
It was eventually decided to end the last panel of the longwall development 193m short of the target, a move that effectively left 120,000 tonnes of coal in the ground.
As these problems bit, Austral's share price plunged.
From a 12-month high of 83c on December 9, the stock slumped, with the biggest fall in the first week of April when Austral dropped from 72c to 60c as production and profit forecasts were downgraded.
Macquarie Equities cut its forecast for 2004 from 2.5 million tonnes to 2.2Mt.
With the move to Tahmoor North, Austral has become much more confident. Managing director Ugo Cario said in late May production from June was expected to be at an annualised rate of 3Mt, rising to 3.5Mt over the initial eight-year-life of Tahmoor North. Pendal expects annual profit to recover to between $15-18 million.
The handful of brokers who follow the stock are slightly more optimistic. Wilson HTM is tipping a profit of $19.4 million for 2004, rising to $39 million next year, and a whopping $60.6 million in 2006.
Macquarie is far more sober. It sees profit of $18.3 million in 2004, $23.1 million in 2005 and $36 million in 2006 – with the difference between Wilson and Macquarie's 2006 forecasts almost wide enough to call for a stewards inquiry. –Australia's Mining Monthly
