cockatoo coal soars as execs meet investors, page-2

Cockatoo Coal soars as executives meet investors
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By Ross Kelly
SYDNEY--Shares in Cockatoo Coal Ltd. soared by a third Wednesday, as the small Australian coal miner started its first investor roadshow in nearly six months with assistance from brokers Credit Suisse and Wilson HTM.

Cockatoo Coal--one of a handful of companies listed in Australia with active mines--has come under pressure from falling prices of steelmaking and thermal coal, and concerns that it may struggle to fund projects that include a planned expansion at the Baralaba mine in Queensland state and its share of the second stage of construction of the Wiggins Island Coal Terminal.

Like many small and mid-cap mining companies, Cockatoo's stock has suffered from slowing demand for commodities in China as its economy cools. The company has lost more than half of its value since the start of this year, and is now worth 122 million Australian dollars (US$124.6 million).

Senior management led by Chief Executive Andrew Lawson, a former executive in Glencore International PLC's coal division, are meeting with investors to trumpet results released last week of a feasibility study into an expansion of the Baralaba mine, which produces pulverised coal injection, a cheaper grade of coal used to make steel.

Cockatoo shares rose 4 cents, or 33%, to 16 cents Wednesday.

"After a period where the market had second-guessed where the floor was on coal stock prices, it's understanding that Cockatoo was oversold," said Greg Germon, the company's investor relations head.

The rally comes just days after a consortium led by South Korean steelmaker Posco made a takeover approach for Australia's Arrium Ltd. (ARI.AU), which produces steel and also owns iron ore mines in Western Australia state. Posco owns about 13% of Cockatoo Coal.

Earlier this year, SK Networks Co. (001.740.SE), the trading arm of South Korean conglomerate SK Group, backed out of a planned A$313 million investment that would have given it a 40% stake in the company and provided funding for the Baralaba expansion.

SK Networks remains a shareholder of Cockatoo with a stake of just over 5% and representation on the board. In April, it agreed to guarantee a A$150 million loan facility from the Australian arm of Korea Exchange Bank due to mature by the end of 2012.

Cockatoo listed in Australia in 2005 and has built a portfolio of coal assets in Queensland and New South Wales states. The company aims to increase production at its Baralaba open-cut mine in the Bowen Basin region from about 750,000 metric tons to 3.5 million tons by 2014.

-Write to Ross Kelly at [email protected]