This six-year assistance package represents about 7% of the estimated $18 billion the associated carbon tax will bleed from the industry over nine years yet it might help prevent some significant mine closures before the next federal election.

MPW used Illawarra coal miner Gujarat as a test case for possible impacts from both the carbon tax and the CSJP.

MPW said the carbon tax would slash its net present value estimate for Gujarat by 20-65%.

But it also believed that Gujarat’s two underground mines would be part of the 25 mines the government expected to receive CSJP assistance.

“That said, on the limited wording provided to date on the structure of the CSJP it does not appear to make any recognition of highly gaseous coal operations in ramp-up mode, such as Gujarat’s two mines,” MPW said.

“We would highlight that given the inequality that this creates for those companies which have invested considerable capital to date, the motivation for a compromise between the government and those affected is high.”

Consequently MPW slapped an outperform rating on Gujarat shares and a 12-month price forecast of 55c.

It said the price catalyst would be “further clarification” of the CSJP, which it evidently believes will work in Gujarat’s favour.

However, MPW’s analysts also revised down their previous 12-month price forecast of 80c due to lower earnings and the carbon tax impact on NPV estimates.

“We believe that at current levels Gujarat’s underlying value represents significant upside (83%) for those prepared to bear the risk of an uncertain carbon pricing mechanism, development risk and further potential funding requirements.”

Gujarat shares were at 30c at the time of the report, and they are up half a cent to 33.5c this morning.