Prairie Mining recently published an update describing the coking coal macro in Europe and Poland. The release focused on the European Commission’s 2017 critical materials list, the global lack of new coking coal projects, and the Polish government’s support for new modern coal mines. We also note how the new Polish Prime Minister is pushing the Polish-Chinese business agenda, which will benefit Prairie Mining.
Mateusz Morawiecki recently became Prime Minister and he strongly supports Chinese investment into Poland. Amongst other things, he has recently said “to encourage Chinese companies to invest more capital in our country” and “Poland wants to actively participate in the One Belt, One Road project”.
This agenda fits perfectly with Prairie’s strategy of having China Coal construct Jan Karski using low-cost Chinese debt. And we believe support from the new Polish Prime Minister will ensure Jan Karski reaches the point of being fully permitted and funded. As with all major industrial projects, top level government support is essential.
Prairie Mining shares have underperformed our expectations in 2H17 (the shares increased 50% in 1H17). The lack of buying could be due to negative general media surrounding coal. However, Prairie is a coking coal not thermal coal company and has strong political and European macro support . We anticipate 2018 being a good year for Prairie shares and reiterate our BUY recommendation and 90p price target.
Full research note here Beaufort_PDZ_181217