SHARES IN RJB Mining defied gravity on their way up. Now that they are on the way down no-one is prepared to call the bottom. Yesterday they fell another 6p to hit a record low of 79p even though first-half profits, at pounds 44.7m, were at the top end of forecasts.
What did the damage was the bigger than expected dividend cut, from 10p to 3p, allied to uncertainty about whether Britain's biggest coal producer will sign extra supply deals with the electricity generators.
The shares ought to be a buy. At the current price they are trading on an historic multiple of one. Even assuming earnings fall by two-thirds this year, the shares will still be on a forward multiple of just three. The yield, meanwhile, is bigger than the multiple, even supposing the payout for the year is no more than 6p. That points to earnings being insufficient to support any dividend.
RJB's Richard Budge certainly faces challenges. Despite the gas ban, there are enough gas-fired stations in the pipeline to remove another 12 million tonnes of coal demand and Mr Budge will need to work like fury to keep production costs below the prices the generators are likely to offer to buy more coal.
But the long-time bear of the stock, Paribas' Charles Kernot, reckons the current share price cannot be justified by the worst-case scenario where all deep-mined pits are shut. Without any upside from new contracts, he has pencilled in profits of pounds 27m next year, putting the shares on a multiple of six times. Given the market's lack of appetite for RJB, Mr Budge could be forgiven for taking the business private again. Investors should think of buying the shares before he does.