18th Dec 2015 17:00
LONDON (Alliance News) - New World Resources PLC said late Friday that it expects to incur costs of up to EUR100.0 million by closing two of its mines in the Czech Republic and said it will need to slash costs further and secure more funds in order to survive the downturn in coal prices.
New World is expecting to book losses before certain items between 2015 and 2018, as it struggles to deal with falling prices.
The company has launched a strategic review of the entire business as coking-coal prices continue to be placed under further pressure due to slower industrial demand, whilst the thermal coal market is struggling with oversupply and aggressive pricing from competitors.
The company said despite slashing overheads by over 40% since 2014, it is still cashflow negative and looks set to remain that way for "several years". It has already conceded it will need to refinance its credit facility sometime in 2016.
The biggest shock was the company's decision to close the Paskov and Lazy mines in the Czech Republic by the end of 2017, leading to an "employee-restructuring", which will cost the company between EUR85.0 million and EUR100.0 million.
New World Resources did not state where that money would be coming from.
"Management is aware that all of this may create a level of uncertainty for our stakeholders, including employees. Management will work closely with employees' representatives and will provide regular updates," said New World.
It has other mines in the country, with other assets in neighbouring Poland, but New World is now reviewing the entire business with the aim of securing some cash-generative assets.
In an attempt to attract some potential buyers, the company released some additional "illustrative" financial projections, but said they "should not be construed as estimates or forecasts".
New World said it has no concerns about finding buyers for its coal, and has projected it will sell 9% more coal than it will produce in 2016 to bring down its inventory.
The company also said revenue from the sale of coal by-products is estimated to be around EUR30.0 million in 2016, falling 20% in 2017 and the by 75% in 2018 as those mines shut down.
Earnings before interest, tax, depreciation and amortisation is set to be a EUR51.0 million loss in 2016, and that excludes the costs related to mine closures and restructuring costs.
That loss will then widen to a EUR60.0 million loss in 2017, before returning to a EUR36.0 million profit in 2018. Beyond that, it forecasts Ebitda in 2019 would rise to EUR40.0 million, but drop to only EUR16.0 million in 2020.
New World shares closed down 19% to 0.2416 pence per share on Friday.
By Joshua Warner; [email protected]; @JoshAlliance
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