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New World Resources N.V. (“NWR” or the “Company”), Central Europe’s leading hard coal producer, announces today production and sales volumes, realised prices and a brief performance update for the full year 2009 as well as 2010 sales contract volumes, average prices agreed with its customers to date, production and cost guidance for 2010.
Full Year 2009 Performance Update
NWR will publish its preliminary full year results for the year ended 31 December 2009 on 24 February 2010 and additional details will be publicly disclosed at such time. NWR notes that the above realised average prices differ from guidance for the full year 2009 contract average prices provided by the Company at the time of its full year 2008 results. As the Company has indicated during the year, realised prices were influenced by a variety of factors including exchange rate fluctuations, quality mix and time of deliveries throughout the year, as well as other provisions related to certain individual contracts and the impact of the global financial crisis and economic slowdown. Mining cash cost per tonne (in Euros) in the fourth quarter of 2009 continued to be stable as compared to the nine months ended 30 September 2009. Total CAPEX spent in 2009 was approximately 7% above previous guidance of EUR 234 million primarily due to capitalisation of POP 2010 related expenses as implementation was ahead of schedule. The Company is in compliance with its financial covenants based upon unaudited 2009 management accounts. Update on 2010 Contracting
Due to the unprecedented developments occurring in the steel, coal and coke markets in 2009 and recent upward trends in the coking coal market, there has been a shift in the timing of negotiations for coking coal contracts. NWR agreed with its coking coal customers to set provisional prices for the first quarter 2010 contracts, and expects to re-negotiate coking coal prices in March and April for contract terms to run the length of the next Japanese fiscal year (JFY), which runs from April to March. NWR believes that moving away from the calendar year pricing into the JFY pricing will be beneficial as it will enable its coking coal contracts to more closely follow and potentially benefit from the developments in the international global coal benchmark prices. There are no changes to the timeframe for the thermal coal contracting, which continues to follow the calendar year, as well as for the coke contracts, which remain quarterly. Coking coal
The external coking coal contracts agreed for the first quarter of 2010 cover a committed volume of 1.5Mt, representing approximately 23% of the expected annual production volume. The average contract price agreed for coking coal for the first quarter of 2010 is EUR 103 per tonne, an 18% increase compared to EUR 87 per tonne realised in 2009. The price increase for coking coal is in line with current market trends and reflects the increase in production in the steel industry in Central and Eastern Europe (“CEE”) since the end of 2009. Thermal coal
The thermal coal contracts for the full year 2010 cover a committed volume equivalent to 100% of the expected annual production volume. The average contract price for thermal coal in 2010 is EUR 63 per tonne, a 13% decrease compared to EUR 72 per tonne realised in 2009. The price decrease for thermal coal reflects an adjustment to the high prices NWR enjoyed in 2009, as the demand for thermal coal has not yet recovered in the CEE largely due to the stockpiles of thermal coal accumulated in the energy sector during 2009. Coke
The coke contracts for the first quarter of 2010 cover a committed volume of 266kt, representing 27% of expected annual production volume. The average contract price for coke for the first quarter of 2010 is EUR 195 per tonne, a 29% increase compared to EUR 149 per tonne realised in 2009, reflecting the continued improvement in the regional coke markets and the general improvement in global coke markets since the end of 2009. NWR further notes that the average contract prices are indicative prices, as these can be influenced by a range of factors including, but not limited to, exchange rate fluctuations, quality mix and timing of the coal deliveries, flexible provisions in the individual contracts. Thus the actual realised price for the period may differ from the average contract prices announced. 2010 Production Targets
Based on current market developments, expected sales for the year and current levels of inventory, NWR along with its coal mining subsidiary OKD, a.s. (“OKD”) and its coking subsidiary OKK Koksovny, a.s. (“OKK”) have set its production targets for the year 2010 at 11Mt of coal and 1Mt of coke. Of the total coal production, NWR expects that approximately 60% will be coking coal and 40% will be thermal coal. 2010 Cost Guidance and Update on CAPEX
On 22 January, NWR announced the successful conclusion of negotiations with the trade unions for OKD. Based on the outcome of this agreement and the fact that OKD represents the majority of the workforce, the Company expects that total personnel expenses for NWR in 2010 will remain stable compared to 2009, on a constant currency basis. Furthermore NWR expects the Company’s service expenses to increase on the back of rising transportation costs which are passed through to customers. As for materials and energy expenses, NWR expects a significant increase in 2010, as the operations intensify their development works. Overall, NWR expects total operational expenses to be higher in 2010 compared to 2009. In addition to NWR’s annual maintenance CAPEX of approximately EUR 80 to 100 million the Company has certain capital expenditure commitments related the Group’s optimisation programmes of approximately EUR 50 million related to POP 2010 (deferred payments) and EUR 35 million related to COP 2010. 2010 Exchange Rate Assumptions
All of the prices and costs mentioned above are based on an exchange rate for CZK/EUR of 24.5. As approximately 60% of our sales contracts and the majority of our costs are Czech Koruna denominated, changes in the foreign exchange rate may lead to fluctuations in the above-mentioned prices and costs. In line with the Company’s policy to hedge its exposure to currency fluctuations, approximately 43% of the forecasted 2010 exposure is covered by forward contracts. The expected proceeds from the NWR Energy sale will cover the balance of the expected 2010 exposure. Additional details regarding NWR’s performance in 2009, recent developments and outlook for the year are expected to be disclosed with the full year 2009 results on 24 February 2010. |
