RJB Mining ahead on debt

DAVID HELLIER

RJB Mining, the company that raised about pounds 1bn at the beginning of the year to acquire most of British Coal's English mining assets, yesterday said that it was likely to pay back its bankers 18 months ahead of schedule.

The company, announcing interim profits of pounds 85.8m on turnover of pounds 740m, is demonstrating that things have gone as well as anyone could have expected on the financial front since the deal with British Coal.

Yesterday's results, however, were significantly inflated by the sale of 3 million tonnes of coal from the company's stock-pile, made possible because of shutdowns at two of the nuclear plants.

Charles Kernot, analyst at Paribas, reckons that the sale of coal stocks may have added around pounds 20m to profits, something which is unlikely to be repeated in the second-half of the year.

Gordon McPhie, RJB's finance director, said the company had used about pounds 40m of the extra pounds 100m turnover generated by the sale of coal stocks to invest in mine development. The rest went into paying off acquisition debt.

With RJB's bankers increasingly happy with the company's rapid debt repayment - bank debt has been reduced from pounds 368m to pounds 153m - some shareholders are turning their attention to what the company will look like after its present contracts with National Power and PowerGen expire in 1998.

Mr Kernot argues that the company's long-term value will be adversely affected by lower demand for coal in the face of increased competition from gas.

Mr McPhie, however, points to an increase in the internationally-traded spot price of coal - from $38 a tonne since the beginning of the year to $48-$50 now - to lend credibility to the heavily criticised forecasts used in RJB's prospectus at the time of the British Coal deal.

"The indications seem to be that international prices will continue to rise.

"If this continues to be the case, RJB's price assumptions for 1998-9 will look reasonable, even a touch conservative" Mr McPhie says.

The company announced that it had signed a contract to supply up to 5 million tonnes of coal over five years to Alcan Smelting and Power UK for the Lynemouth power station near Blyth, Northumberland.

It did not disclose price details, apart from saying that the agreement was secured at prices "consistent with those prices anticipated" at the time of the prospectus.

The dividend is raised from 5.2p to 5.5p and the shares closed up 7p at 425p.

Separately, NSM announced yesterday that it was paying pounds 8.5m to purchase the assets of Ryan Mining and a sister company,Westland Mining. The business of Ryan Mining includes two underground mines in South Wales.