The outlook for Austral Coal Ltd can be summed up in a word — flat. A flat shareprice, flat coal prices received, and flat production. However, analyst Greg Chessell from Paterson Ord Minnett suggested the flat outlook belied Austral’s turnaround of the previously troubled Tahmoor mine near Wollongong in New South Wales, where major improvements in productivity and profitability had been posted in the past two years.
"Austral continues to perform very well operationally," Chessell said in an investment review. "We are particularly impressed with the productivity levels (which had doubled over two years to 11,000 tonnes per man year) and future sales commitments.
"Tahmoor is becoming mine constrained rather than market constrained which has previously limited the outlook. The benefit of this situation is that mine constraints are controllable whereas market constraints are not."
Chessell said strong demand for Tahmoor’s premium quality hard coking coal output could see its current contract prices maintained next year in the face of further pressure on benchmark Australian coking coals.
If productivity levels could be maintained and sales continued to be strong, Tahmoor could achieve higher production of about 1.4Mt in calendar 2000. The mine was on target to produce about 1.28Mt in 1999, Chessell said.
"We believe that Austral is unlikely to show any positive share price performance until the outcome of coal price negotiations ... despite its undervalued status."