BZW's research report focused attention on RJB's ability to compete with cheaper overseas imports of coal in the wake of sterling's rapid recent appreciation. BZW reined in its profits forecast for the current year from pounds 196m to pounds 185m and next year from pounds 232m to pounds 192m. The two-year shortfall of pounds 50m pushed the shares 112.5p lower to 372.5p.
That compares with the 551p at which chief executive Richard Budge sold 400,000 shares, netting more than pounds 2m, as part of a pounds 95m share buy-back in July. That bonanza came on top of a more than 60 per cent rise in his salary to pounds 666,000.
Further evidence was provided a month ago that RJB's directors felt the shares were fully priced when four of them exercised share options granted at 250p and immediately sold in the market at 555p.
There was heavy trading yesterday of almost 5 million shares. This was understood to have been caused by institutions, which had been brought into the stock by BZW in 1994 when RJB acquired most of British Coal's assets, taking fright at the house broker's first apparent change of stance on the stock.
A spokesman for the company insisted that the forecast reduction only brought BZW into line with the market consensus. BZW, he said, remained a buyer of the stock.
The collapse in RJB's share price is the latest twist in a controversial period since it took what was seen as a huge gamble in buying what remained of the British coal mining industry.
At the time of the pounds 815m acquisition, sceptics said RJB's ebullient Mr Budge had overpaid for the mines. Later, when he repaid loans used to finance the deal in a third of the projected time, the Labour Party used the company's apparent financial success to suggest the industry had been sold off on the cheap.
Disagreement over the company's prospects remains heated. Charles Kernot, an analyst at Paribas Capital Markets and a seller of the stock since it peaked at 625p in May, said the fall yesterday vindicated his stance.
He maintains that the market is only just beginning to appreciate the pressures facing RJB once fixed-price contracts set up by the Government prior to the sale of the power generators run out in April 1998. He believes those generators are unwilling to sign up to contracts after that date at the price of 125p a gigajoule RJB is trying to negotiate.
Other pressures on RJB include increasing competition in the domestic electricity market starting in 1998, which will push down generators' earnings and encourage them to squeeze their own costs, including fuel. Environmental pressures are also encouraging the use of gas rather than coal.
Estimates of coal demand after 1998 differ wildly. Mr Budge has forecast a need for 51 million tonnes of coal a year, while Oxera, the economic analysts, puts demand as low as 15 million tonnes.
Finally, although RJB has reduced its cost of production sharply, it still faces stiff competition from large open-cast mines in north and south America, against which its deep shaft mines, even sited near the power stations they serve, find it hard to compete.
The cost of producing coal in Britain has been cut from about pounds 33 a tonne in 1993 to pounds 30 or less now, but the generators are pressing for even lower prices that would compete with the spot price of marginal volumes of imported coal.
In September RJB announced a 2.5p increase in its interim dividend to 8p after reporting flat profits of pounds 86.1m (pounds 85.5m).