The turbulent industry factors have not deterred the company’s Bowen Basin expansion plans, which remain on track, as it sinks more holes into Baralaba North and South while its Surat Basin assets get a resource upgrade, Fat Prophets said.

“Changes are having a significant impact on the pricing and outlooks for the different coal types produced by the industry,” it said.

“Cockatoo Coal’s timing to cease thermal coal production and return to producing pulverised coal injection (PCI) coal has come at a time when PCI coal has real price differential and positive outlook advantage.”

PCI coal production in the December quarter rose 149.1% on the same quarter in 2011, to 186,950 tonnes. Total coal production rose 68.3% for the same comparative period, to 186,950 tonnes.

“Going forward, the company will continue to produce only PCI coal as mining operations at Baralaba focuses only on the quality in ground coal seams,” Fat Prophets said.

“A return to all PCI coal production has delivered to the company a real value-added benefit, as it gains better pricing for its product. A price for PCI coal of $141 per tonne has been struck for the April to June 2013 period for the supply of PCI coal out of Australia.

“The June quarter 2013 price rise represents a 14.6% rise on the March quarter 2013 price and indicates a likely firmer undertone for PCI coal while the price of Australian thermal coal is currently trading in the range $90 to $100 per tonne.”

Fat Prophets estimates that Cockatoo’s production cash costs for the December quarter 2012 were about $112 per tonne. In a PCI price scenario of $141 per tonne or similar, the company will generate a profitable operating margin, it said.

“The broader macro factors impacting on the coal sector generally must be kept in mind,” Fat Prophets said. “However, Cockatoo Coal’s return to PCI production over thermal coal should add operational and financial value.”