We have recently had a chat with management of Indika Energy. Overall, we sense that production and pricing could come in better than what we have been assumed. We will put out more detailed notes once we meet the management later this week.
* The management is looking to add 5m tonnes per annum on production, hence total production could reach 29m tonnes in 2010 and 33m tonnes in 2011, higher than currently assumed of 28m tonnes and 30m tonnes, respectively. Production increment would come from lower CV coal, Samaranggau, though.
* There has been no new contract secured by engineering and mining contracting subsidiary, Petrosea, but its Santan coal mine, 50% owned, could start producing 2.5m tonnes in 2010. We have not factored this.
* Of the total targeted volume of 28m tonnes, around 30% is fixed at US$48/t, 10% is index-linked, and the rest, 60%, is still in negotiation. Assuming US$98/t contract price in 2010, the company could get US$56/t ASP in 2010, as compared to US$52/t currently assumed.
Resource update from Resource Head Andrew Driscoll
* Metals up 1-2% Friday on +ve sentiment for Greek bailout, weaker dollar; End week higher, while bulks surge higher.
* WoWchange LME 3M: Aluminium +2.3% (18M-high), copper +0.5%, nickel +0.6%, zinc +0.5%, and gold +3.8%
* Copper exchange stocks +2% WoW, SHFE-LME price spread -1%; Ali stocks flat WoW, price spread -12% (18M-high).
* FOB NEWC thermal coal +3.9% WoW to $98.7/t; CRR Report QHD thermal coal prices flat to higher WoW.
* MB CIF iron ore +13% WoW to $171.5/t (See - CLSA Iron ore data book); Chinese steel & coke prices flat-to-higher WoW.
* Gold at 4M-high (all-time high in Euros); SPDR gold ETF has record holdings
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