A poor first-half at its Black Wattle Colliery in South Africa undermined full-year returns for
Bisichi's share price was dragged down after it revealed that the build up in production at Black Wattle had been slower than anticipated. However, the contribution from the third pit has increased average monthly output by nearly a quarter to 135,000 tonnes, while the ability of Bisichi to shift this new production has been helped by an improved performance from South Africa's state rail operator, Transnet.
The second-half turnaround was also achieved through Bisichi selling a portion of its output to higher-yield domestic markets. While international prices remained stable through 2011, domestic prices have risen by 30 per cent since June. The improved margins helped Bisichi to a trading profit of £1.5m in the second half, reducing the first-half deficit significantly.
Aside from Black Wattle, the proposed ZAR 54.2m (£4.3m) sale of Bisichi's 49 per cent stake in Ezimbokodweni Mining is now only conditional on consent from the South African Department of Mineral Resources.
|BISICHI MINING (BISI)|
|ORD PRICE:||160p||MARKET VALUE:||£17m|
|TOUCH:||150-170p||12-MONTH HIGH:||203p||LOW: 130p|
|DIVIDEND YIELD:||2.5%||PE RATIO:||na|
|NET ASSET VALUE:||159p||NET DEBT:||26%|
|Year to 31 Dec||Turnover (£m)||Pre-tax profit (£m)||Earnings per share (p)||Dividend per share (p)|
Ex-div: 29 Jun
Payment: 13 Aug
Bisichi's improved second-half showing has been maintained into the current year, while the Black Wattle Colliery will also benefit from the annual allocation of 87,500 tonnes of export tonnage at Richards Bay Coal Terminal. The shares now trade in line with book value, but improved output and margins should accelerate recovery and we remain buyers.
Last IC view: Buy, 205p, 26 Apr 2011