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Coal India (COAL.BO)
Buy: Coal Getting Hotter
Maintain Buy, Raising TP — Coal India’s (CIL) stock has had a stellar run, up 29%
YTD, outperforming the Sensex by 39%. We believe the stock price will continue to be
supported by structural upsides on pricing, margins and limited downside to volumes.
The looming shortage of coal in India, which gets exacerbated by infrastructure
bottlenecks and the inability to import adequate coal, provides demand and pricing
robustness for CIL. We raise our TP to Rs471 (from Rs395) as we hike earnings and
roll forward to Sep12 (from Mar12). We continue to value CIL using: 1) DCF+30%
(Rs579 vs Rs469) and 2) 12x Sep12 PE (Rs309 vs Rs284), weighted 60:40. At our TP,
CIL would trade at 16x Sep12 PE (adjusted for overburden removal adjustment).
Estimate changes — We raise FY12-13 PAT by 1-17% to incorporate (1) a 1-5%
increase in average realizations; (2) 2% higher despatch volumes; (3) revised Rs/$
rates 45.9 vs 43.9 for FY12, 44.4 vs 43 for FY13. We now expect cost per employee to
rise 30% yoy in FY12 vs 25% earlier. We estimate FY12-13 margins at 31-33%.
Upside to our estimates — (1) CIL’s FY12 despatch target is 454mt. Press reports
indicate that CIL would ideally like to liquidate 25% of its inventory, implying despatches
of 472mt (+11% yoy) in FY12. We estimate CIL’s FY12 despatches at ~455mt, +7.3%
yoy (est rake requirement of ~175/day). (2) We do not incorporate any price hike (for
raw coal sold under FSAs) in FY12 beyond the increase in Feb11 and estimate a 5%
hike in FY13. A price hike in FY12 or a higher price in FY13 could boost profits. (3)
Change in the overburden removal accounting method will result in higher profits.
FY11 PAT up 11% — PAT came in at Rs108.7bn, 6% above Citi estimates. EBITDA
margin was ~30% vs 25% last year. Production volumes were flat yoy at 431mt
(moratorium on some projects), despatch volumes rose 2% yoy to ~424mt. CIL
benefited from a 10% rise in average realizations (price hikes in Oct09 and Feb11).
Risks — Forest/environmental/pollution clearances, 26% profit sharing Bill, transport
constraints, limited ability to raise prices, higher wage costs than estimated.
]Analyst Meet and Conference Call Takeaways
Production
CIL’s FY11 production remained flat yoy at 431mt – largely due to the moratorium
imposed on mining in clusters identified as critically polluted. A moratorium was
imposed on projects in 43 clusters in Jan10 till Aug10. This was further extended
to 31 March 2011 for 38 projects. Despite flat volumes, CIL benefited from a
better product mix in FY11 - coking coal volumes rose 14% to 41mt and
accounted for ~10% of total production vs 8% in FY10. Thermal coal volumes
declined 1% yoy to 390mt.
As of 31st March 2011, the moratorium has been lifted on projects in 20 clusters
and for the remaining 23 clusters extended till Sep11. The extension of the
moratorium is not likely to impact CIL’s FY12 production target of 452mt (+4.8%
yoy) and CIL is hopeful that the moratorium on all the projects gets lifted
gradually.
CIL’s FY17 target is ~560mt − a CAGR of 4.4% through FY11-17. This target
does not include coal blocks in the no-go areas.
We raise our FY12 production estimates marginally from 447mt to 452mt
(in-line with CIL’s target) and assume a volume CAGR of ~4.5% thereafter.
Despatches
CIL’s despatches rose 2% yoy to ~424mt (1% below our estimates) in FY11. The
muted growth was on account of inadequate rake availability – taking CIL’s
closing inventory to ~71mt as of March11.
In April 2011, CIL liquidated 4.5mt of inventory. Production grew at 4.5% yoy and
despatches grew at 8.8%. Inventory unwinding was on account of better rake
availability −178 rakes/day in April11 vs 158 rakes/day in April10. However, the
rake availability declined in May to ~163/day due to the heat, strikes in Maoist
affected areas and law and order issues. For the two months April and May11,
production grew at 3.3% and despatches rose ~6% yoy.
CIL signed an MOU with the Ministry of Coal in April setting its despatch target at
454mt (+7% yoy) and had sought ~175 rakes/day in FY12 to meet its projected
target vs 162 rakes/day in FY11 and 157 rakes/day in FY10. The company
however believes that it should be able to dispatch more than 454mt by
liquidating inventory and its internal targets are in excess of 454mt. Press reports
indicate that CIL would ideally like to liquidate ~25% of its inventory implying a
despatch target of 472mt (+11% yoy) in FY12. This would imply a rake
requirement of ~180/day (assuming 50% of the volumes are despatched via rail)
and CIL has been in discussions with the Railways to enhance the availability of
daily rakes. They have got a commitment of 190 rakes/day for the month of June.
We estimate that CIL would be able to dispatch ~455mt of coal in FY12
(+7.3% yoy) – the estimated rake requirement to achieve this would be
~175/day.
Pricing
CIL’s average realizations rose ~9% in FY11. The increase can be attributed to 1)
A full year’s benefit of the 11% price hike announced in Oct 2009 (In FY10, the
benefit was only for the second half); 2) The coal price hike announced in end
Feb 2011; 3) Higher prices for e-auction coal; 4) Better product mix.
New pricing structure announced in Feb 2011 — 1) 30% hike for all sectors
except power/defense/fertilizers (~5% of CIL’s volumes); 2) Increase in the price
(~18% for power, ~56% for non-power) of Mahanadi coal (~22% of CIL’s
volumes) to bring it at par with South Eastern Coalfields; 3) Higher prices (+85-
90%) for high quality A and B grade (~6% of volumes) in tandem with global
prices (but at a discount). The new structure implies ~14% hike (constant
volumes) in overall realizations – while we incorporate 20% for FY12 assuming
higher e-auction/washed coal prices (based on global trends).
CIL’s management has not taken a decision on a price hike post the expected
wage revision in July 2011. The company believes that even if prices are not
hiked in FY12, margins will be maintained (given the price hike announced in
Feb2011). While the company has not taken a pricing decision yet, they are
confident that prices would be adjusted in FY13 so as to be able to
maintain/increase margins. We do not estimate a price hike in FY12 (beyond
what has been announced in Feb11), but expect a 5% hike in FY13 (vs 3%
earlier) for coal supplied under the fuel supply agreements. Our overall
FY13 realizations are expected to grow 4% yoy vs flat pricing assumed
earlier.
Costs
The next wage revision is due in July11. We estimate a 30% increase in cost
per employee (vs 25% earlier) but expect the number of employees to
decline by 3% (on account of natural attrition). CIL reduced its workforce by
13,000 to ~384,000 employees in FY11.
E-auction coal diversion unlikely
Media reports indicate that the Association of Power Producer (APP)
representing private power companies has suggested the diversion of Coal
India's (CIL’s) e-auction sales. E-auction coal currently accounts for 11-12% of
CIL’s volumes (~50mt) and the realization is almost 2x the raw coal sold under
Fuel Supply Agreements (FSAs).
The Coal India Chairman stated that he does not think the ban on e-auction coal
is likely. He raised issues such as (1) Power producers did not lift the entire coal
allocated to them last year (304 out of 335mt) − this year the allocation is 347mt -
306 mt is for projects commissioned before 31st March 2009 and the balance
41mt has been allocated by the Central Electricity Authority to new units; (2) Eauction
sales have been approved by the Supreme Court and the New Coal
Distribution Policy (10% of volumes) - any change would need a policy change;
(3) Non-power consumers would be impacted if e-auction is banned; (4) 80% of
e-auction volumes are transported via road - even if these volumes are diverted
to the power sector under fuel supply agreements, there wouldn't be enough
rakes to deliver the coal to the power plants (roads not a feasible mode to move
coal over 700-1000km).
International ventures
CIL was mandated to import 6mt of coal in FY10 but could find customers for
only 0.4mt.
The target was to import 6mt in FY11 again – but CIL has been unable to
conclude terms and conditions. CIL was seeking to deliver coal at the port but
customers have not agreed to it.
CIL is in discussions to assess international acquisitions and tie-ups with coal
companies. It has invited EoIs and is conducting due diligence.
Cash Flow
CIL has earmarked ~Rs60bn for its acquisition plans. Capex targeted for FY12 is
~Rs42bn vs Rs25bn last year.
CIL is unlikely to increase its dividend payout to beyond historic levels (20-40%)
given its investment and capex plans.
Overburden removal (OBR) accounting
CIL has been following a very conservative policy of OBR accounting. During the
life of the project, the actual ratio of overburden removal may vary for a particular
year. The expenditure incurred for removal of excess/less quantity of overburden
for production of coal in a particular year is adjusted against the P&L account by
creating/utilizing reserves in the financial account. This is done to maintain
uniformity of expenditure for coal production by removing over burden throughout
the project life. CIL has been over-expensing overburden removal costs due to
lower than standard stripping ratio. Under IFRS, there will be no charge to the
P&L under this and the liability (OBR adj account) would be added to CIL’s net
worth. CIL is in discussion with the CAG (Comptroller and Auditor General) to
change the accounting methodology prior to the implementation of IFRS.
Coal India
Company description
Coal India (CIL) is the world's largest coal producer, with a production of 431mt flat
yoy), despatches of 424mt (+2%) in FY11 and 18.9bn tonnes of proven and
probable reserves. It has eight subsidiaries in India - seven of which carry out coal
production and Central Mine Planning and Design Institute Ltd, which provides
technical expertise and consultancy to CIL/others. CIL was established in 1973 and
90% is currently held by the Indian government. Non-coking coal accounted for
~90% of production in FY11 and accounts for ~95% of the company's reserve
estimates. CIL accounted for 82% of India's coal production in FY10. Power
generation accounts for ~75-80% of CIL's volumes. CIL has longstanding
relationships with its five biggest clients (48-51% of FY08-10 despatches) all of
which are public-sector power-generating companies. NTPC is its largest customer
and accounted for 27% of its raw coal despatches in FY10. ~90% of CIL's
production is from open-cast mines, where production cost ($12/t) is significantly
cheaper than underground mines ($62/t). Employee costs accounted for 51% of
CIL's expenses in FY11. CIL had ~384k permanent employees as of 31 March
2011.
Investment strategy
We rate CIL shares Buy / Low Risk (1L) with a target price of Rs471 (vs Rs395
earlier). We believe CIL has significant opportunities: 1) huge resources (64.2bn
tonnes); 2) India's growing demand with CIL (431mt in FY10) controlling 80%+ of
India's output; 3) coal pricing at a discount to global prices; 4) increasing value
addition through washing/market-driven pricing; 5) high return, structurally low-cost
operations ( average cost ~$17/t); 7) >US$10bn net cash. CIL’s stock has had a
stellar run, up 29% YTD, outperforming the Sensex by 39%. We believe that stock
price will continue to be supported by structural upsides on pricing, margins and
limited downside to volumes. The looming shortage of coal in India which gets
exacerbated by infrastructure bottlenecks and the inability to import adequate coal
provides demand and pricing robustness for CIL.
Valuation
Our target price of Rs471 is arrived at using (1) a valuation based on DCF + 30%
premium (Rs579/sh) and (2) a 12x Sep12 PE based valuation (Rs309/sh), with a
60/40 weighting. This method incorporates both CIL's asset valuation and also its
earnings potential. Our DCF valuation is enhanced by 30% to account for the
probable reserves (8.3bn tonnes - an additional 78% over the proven reserves) that
we have not incorporated in our valuation. We have not taken a terminal value and
thus also use a PE-based valuation as it assumes new reserves replace the ones
exhausted. The lower weightage to PE seems justified given CIL's limited exposure
to international prices and that the benefits of beneficiation are likely to have a
meaningful impact only after 3-4 years - thus PE alone cannot fully capture a fair
valuation. At our TP, CIL would trade at 16x Sep12 PE (adjusted for overburden
removal adjustment).
Risks
We rate Coal India shares Low Risk based on our quantitative risk rating system.
We believe CIL's stable margins, mine life visibility, limited risk of coal price
downside, low costs and net cash position warrant a Low Risk rating. Downside
risks that could prevent the shares from reaching our target price include, but are
not limited to: risks of restrictions imposed by regulators related to forest clearance
and environmental safeguards; difficulties in obtaining reserves/resources; a
proposed 26% profit-sharing requirement contained in the New Mining Bill; land
acquisition; logistical constraints including rail transport bottlenecks; restricted ability
to raise coal prices; higher wages than anticipated; disruption of operations in
politically unstable areas; auction for future reserves; and non-availability of critical
equipment.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Coal India (COAL.BO)
Buy: Coal Getting Hotter
Maintain Buy, Raising TP — Coal India’s (CIL) stock has had a stellar run, up 29%
YTD, outperforming the Sensex by 39%. We believe the stock price will continue to be
supported by structural upsides on pricing, margins and limited downside to volumes.
The looming shortage of coal in India, which gets exacerbated by infrastructure
bottlenecks and the inability to import adequate coal, provides demand and pricing
robustness for CIL. We raise our TP to Rs471 (from Rs395) as we hike earnings and
roll forward to Sep12 (from Mar12). We continue to value CIL using: 1) DCF+30%
CIL would trade at 16x Sep12 PE (adjusted for overburden removal adjustment).
Estimate changes — We raise FY12-13 PAT by 1-17% to incorporate (1) a 1-5%
increase in average realizations; (2) 2% higher despatch volumes; (3) revised Rs/$
rates 45.9 vs 43.9 for FY12, 44.4 vs 43 for FY13. We now expect cost per employee to
rise 30% yoy in FY12 vs 25% earlier. We estimate FY12-13 margins at 31-33%.
Upside to our estimates — (1) CIL’s FY12 despatch target is 454mt. Press reports
indicate that CIL would ideally like to liquidate 25% of its inventory, implying despatches
of 472mt (+11% yoy) in FY12. We estimate CIL’s FY12 despatches at ~455mt, +7.3%
yoy (est rake requirement of ~175/day). (2) We do not incorporate any price hike (for
raw coal sold under FSAs) in FY12 beyond the increase in Feb11 and estimate a 5%
hike in FY13. A price hike in FY12 or a higher price in FY13 could boost profits. (3)
Change in the overburden removal accounting method will result in higher profits.
FY11 PAT up 11% — PAT came in at Rs108.7bn, 6% above Citi estimates. EBITDA
margin was ~30% vs 25% last year. Production volumes were flat yoy at 431mt
(moratorium on some projects), despatch volumes rose 2% yoy to ~424mt. CIL
benefited from a 10% rise in average realizations (price hikes in Oct09 and Feb11).
Risks — Forest/environmental/pollution clearances, 26% profit sharing Bill, transport
constraints, limited ability to raise prices, higher wage costs than estimated.
]Analyst Meet and Conference Call Takeaways
Production
CIL’s FY11 production remained flat yoy at 431mt – largely due to the moratorium
imposed on mining in clusters identified as critically polluted. A moratorium was
imposed on projects in 43 clusters in Jan10 till Aug10. This was further extended
to 31 March 2011 for 38 projects. Despite flat volumes, CIL benefited from a
better product mix in FY11 - coking coal volumes rose 14% to 41mt and
accounted for ~10% of total production vs 8% in FY10. Thermal coal volumes
declined 1% yoy to 390mt.
As of 31st March 2011, the moratorium has been lifted on projects in 20 clusters
and for the remaining 23 clusters extended till Sep11. The extension of the
moratorium is not likely to impact CIL’s FY12 production target of 452mt (+4.8%
yoy) and CIL is hopeful that the moratorium on all the projects gets lifted
gradually.
CIL’s FY17 target is ~560mt − a CAGR of 4.4% through FY11-17. This target
does not include coal blocks in the no-go areas.
We raise our FY12 production estimates marginally from 447mt to 452mt
(in-line with CIL’s target) and assume a volume CAGR of ~4.5% thereafter.
Despatches
CIL’s despatches rose 2% yoy to ~424mt (1% below our estimates) in FY11. The
muted growth was on account of inadequate rake availability – taking CIL’s
closing inventory to ~71mt as of March11.
In April 2011, CIL liquidated 4.5mt of inventory. Production grew at 4.5% yoy and
despatches grew at 8.8%. Inventory unwinding was on account of better rake
availability −178 rakes/day in April11 vs 158 rakes/day in April10. However, the
rake availability declined in May to ~163/day due to the heat, strikes in Maoist
affected areas and law and order issues. For the two months April and May11,
production grew at 3.3% and despatches rose ~6% yoy.
CIL signed an MOU with the Ministry of Coal in April setting its despatch target at
454mt (+7% yoy) and had sought ~175 rakes/day in FY12 to meet its projected
target vs 162 rakes/day in FY11 and 157 rakes/day in FY10. The company
however believes that it should be able to dispatch more than 454mt by
liquidating inventory and its internal targets are in excess of 454mt. Press reports
indicate that CIL would ideally like to liquidate ~25% of its inventory implying a
despatch target of 472mt (+11% yoy) in FY12. This would imply a rake
requirement of ~180/day (assuming 50% of the volumes are despatched via rail)
and CIL has been in discussions with the Railways to enhance the availability of
daily rakes. They have got a commitment of 190 rakes/day for the month of June.
We estimate that CIL would be able to dispatch ~455mt of coal in FY12
(+7.3% yoy) – the estimated rake requirement to achieve this would be
~175/day.
Pricing
CIL’s average realizations rose ~9% in FY11. The increase can be attributed to 1)
A full year’s benefit of the 11% price hike announced in Oct 2009 (In FY10, the
benefit was only for the second half); 2) The coal price hike announced in end
Feb 2011; 3) Higher prices for e-auction coal; 4) Better product mix.
New pricing structure announced in Feb 2011 — 1) 30% hike for all sectors
except power/defense/fertilizers (~5% of CIL’s volumes); 2) Increase in the price
(~18% for power, ~56% for non-power) of Mahanadi coal (~22% of CIL’s
volumes) to bring it at par with South Eastern Coalfields; 3) Higher prices (+85-
90%) for high quality A and B grade (~6% of volumes) in tandem with global
prices (but at a discount). The new structure implies ~14% hike (constant
volumes) in overall realizations – while we incorporate 20% for FY12 assuming
higher e-auction/washed coal prices (based on global trends).
CIL’s management has not taken a decision on a price hike post the expected
wage revision in July 2011. The company believes that even if prices are not
hiked in FY12, margins will be maintained (given the price hike announced in
Feb2011). While the company has not taken a pricing decision yet, they are
confident that prices would be adjusted in FY13 so as to be able to
maintain/increase margins. We do not estimate a price hike in FY12 (beyond
what has been announced in Feb11), but expect a 5% hike in FY13 (vs 3%
earlier) for coal supplied under the fuel supply agreements. Our overall
FY13 realizations are expected to grow 4% yoy vs flat pricing assumed
earlier.
Costs
The next wage revision is due in July11. We estimate a 30% increase in cost
per employee (vs 25% earlier) but expect the number of employees to
decline by 3% (on account of natural attrition). CIL reduced its workforce by
13,000 to ~384,000 employees in FY11.
E-auction coal diversion unlikely
Media reports indicate that the Association of Power Producer (APP)
representing private power companies has suggested the diversion of Coal
India's (CIL’s) e-auction sales. E-auction coal currently accounts for 11-12% of
CIL’s volumes (~50mt) and the realization is almost 2x the raw coal sold under
Fuel Supply Agreements (FSAs).
The Coal India Chairman stated that he does not think the ban on e-auction coal
is likely. He raised issues such as (1) Power producers did not lift the entire coal
allocated to them last year (304 out of 335mt) − this year the allocation is 347mt -
306 mt is for projects commissioned before 31st March 2009 and the balance
41mt has been allocated by the Central Electricity Authority to new units; (2) Eauction
sales have been approved by the Supreme Court and the New Coal
Distribution Policy (10% of volumes) - any change would need a policy change;
(3) Non-power consumers would be impacted if e-auction is banned; (4) 80% of
e-auction volumes are transported via road - even if these volumes are diverted
to the power sector under fuel supply agreements, there wouldn't be enough
rakes to deliver the coal to the power plants (roads not a feasible mode to move
coal over 700-1000km).
International ventures
CIL was mandated to import 6mt of coal in FY10 but could find customers for
only 0.4mt.
The target was to import 6mt in FY11 again – but CIL has been unable to
conclude terms and conditions. CIL was seeking to deliver coal at the port but
customers have not agreed to it.
CIL is in discussions to assess international acquisitions and tie-ups with coal
companies. It has invited EoIs and is conducting due diligence.
Cash Flow
CIL has earmarked ~Rs60bn for its acquisition plans. Capex targeted for FY12 is
~Rs42bn vs Rs25bn last year.
CIL is unlikely to increase its dividend payout to beyond historic levels (20-40%)
given its investment and capex plans.
Overburden removal (OBR) accounting
CIL has been following a very conservative policy of OBR accounting. During the
life of the project, the actual ratio of overburden removal may vary for a particular
year. The expenditure incurred for removal of excess/less quantity of overburden
for production of coal in a particular year is adjusted against the P&L account by
creating/utilizing reserves in the financial account. This is done to maintain
uniformity of expenditure for coal production by removing over burden throughout
the project life. CIL has been over-expensing overburden removal costs due to
lower than standard stripping ratio. Under IFRS, there will be no charge to the
P&L under this and the liability (OBR adj account) would be added to CIL’s net
worth. CIL is in discussion with the CAG (Comptroller and Auditor General) to
change the accounting methodology prior to the implementation of IFRS.
Coal India
Company description
Coal India (CIL) is the world's largest coal producer, with a production of 431mt flat
yoy), despatches of 424mt (+2%) in FY11 and 18.9bn tonnes of proven and
probable reserves. It has eight subsidiaries in India - seven of which carry out coal
production and Central Mine Planning and Design Institute Ltd, which provides
technical expertise and consultancy to CIL/others. CIL was established in 1973 and
90% is currently held by the Indian government. Non-coking coal accounted for
~90% of production in FY11 and accounts for ~95% of the company's reserve
estimates. CIL accounted for 82% of India's coal production in FY10. Power
generation accounts for ~75-80% of CIL's volumes. CIL has longstanding
relationships with its five biggest clients (48-51% of FY08-10 despatches) all of
which are public-sector power-generating companies. NTPC is its largest customer
and accounted for 27% of its raw coal despatches in FY10. ~90% of CIL's
production is from open-cast mines, where production cost ($12/t) is significantly
cheaper than underground mines ($62/t). Employee costs accounted for 51% of
CIL's expenses in FY11. CIL had ~384k permanent employees as of 31 March
2011.
Investment strategy
We rate CIL shares Buy / Low Risk (1L) with a target price of Rs471 (vs Rs395
earlier). We believe CIL has significant opportunities: 1) huge resources (64.2bn
tonnes); 2) India's growing demand with CIL (431mt in FY10) controlling 80%+ of
India's output; 3) coal pricing at a discount to global prices; 4) increasing value
addition through washing/market-driven pricing; 5) high return, structurally low-cost
operations ( average cost ~$17/t); 7) >US$10bn net cash. CIL’s stock has had a
stellar run, up 29% YTD, outperforming the Sensex by 39%. We believe that stock
price will continue to be supported by structural upsides on pricing, margins and
limited downside to volumes. The looming shortage of coal in India which gets
exacerbated by infrastructure bottlenecks and the inability to import adequate coal
provides demand and pricing robustness for CIL.
Valuation
Our target price of Rs471 is arrived at using (1) a valuation based on DCF + 30%
premium (Rs579/sh) and (2) a 12x Sep12 PE based valuation (Rs309/sh), with a
60/40 weighting. This method incorporates both CIL's asset valuation and also its
earnings potential. Our DCF valuation is enhanced by 30% to account for the
probable reserves (8.3bn tonnes - an additional 78% over the proven reserves) that
we have not incorporated in our valuation. We have not taken a terminal value and
thus also use a PE-based valuation as it assumes new reserves replace the ones
exhausted. The lower weightage to PE seems justified given CIL's limited exposure
to international prices and that the benefits of beneficiation are likely to have a
meaningful impact only after 3-4 years - thus PE alone cannot fully capture a fair
valuation. At our TP, CIL would trade at 16x Sep12 PE (adjusted for overburden
removal adjustment).
Risks
We rate Coal India shares Low Risk based on our quantitative risk rating system.
We believe CIL's stable margins, mine life visibility, limited risk of coal price
downside, low costs and net cash position warrant a Low Risk rating. Downside
risks that could prevent the shares from reaching our target price include, but are
not limited to: risks of restrictions imposed by regulators related to forest clearance
and environmental safeguards; difficulties in obtaining reserves/resources; a
proposed 26% profit-sharing requirement contained in the New Mining Bill; land
acquisition; logistical constraints including rail transport bottlenecks; restricted ability
to raise coal prices; higher wages than anticipated; disruption of operations in
politically unstable areas; auction for future reserves; and non-availability of critical
equipment.
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