With record coal prices underscoring its growing bottomline, Indonesia-based producer Geo Energy Resources has fully redeemed its outstanding bond, saving itself financing cost of some US$4.8 million a year.
Upon full redemption of the bond, the company, as at Oct 10, sits on cash balance of US$62.4 million.
Following the go-ahead by the authorities to raise its production quota, Geo Energy is targeting monthly output of one million tonnes between Oct and Dec.
On Oct 8, coal prices hit a record US$122.08 per tonne, due to surge in demand and disruptions in supply. At this level, Geo Energy is making a cash profit of US$50 per tonne — more than triple the US$15 it was able to fetch on average in 1HFY2021.
As such, the company expects 2HFY2021 revenue to be “much stronger” than 1HFY2021’s US$220.3 million and for the full year, the topline might hit US$700 million or more.
CEO Tung Kum Hon expects coal prices to “remain strong”, at least “for the near future”.
“There is a global energy crisis and in China, curbs on power consumption have disrupted daily life and factory production. Supply in China has also been impacted as severe weather led to 27 coal mines being closed due to flooding,” he says.
“With an unusually cold winter in Europe and China looming, and coal stocks being low throughout the world, coal prices are expected to remain high at least through winter,” he adds.
With the full redemption of the bonds, Geo Energy will now have the leeway to declare and pay higher dividends. Under terms of the bond issue, it was restricted from doing so.
The company plans to pay out at least 30% of its earnings.
Geo Energy Resources closed Oct 13 at 38.5 cents.
Photo: Geo Energy Resources
