KEY POINTS:
Pike River Coal's NZX debut yesterday saw shares reach a 2 per cent premium on their issue price despite the high dollar and uncertainty around coal prices, prompting analysts to say investors were taking a long-term view on currency issues.
Following this week's successful initial public offering which
raised $85 million, the company's share price opened at a high of $1.08, before closing at $1.02 after 1.4 million shares changed hands.
Pike River also plans to list on the ASX.
The IPO sought $65 million but was oversubscribed by $20 million making it the largest public equity raising in New Zealand this year.
ABN Amro Craig head of research, Mark Lister, said that the stock had done well despite the high dollar which showed investors were looking beyond short-term currency issues.
There could also have been a parochial element to the IPO success, he said, due to the lack of opportunities to invest in commodities in New Zealand.
In a report to investors this month Forsyth Barr analyst Guy Hallwright valued the stock at $1.19.
However that value was "sensitive" to future coking coal prices and the US exchange rate, he said.
Demand for coal from India and China had caused a "stunning" boom in commodities over the past few years, he said, and while hard coking coal prices were slightly below their 2005 peak they were still well above their historic average. Forsyth Barr's $1.20 valuation is based on a common market view that premium hard coking coal prices will drop by 2012.
Pike River will negotiate coal prices with customers each year.
Forsyth Barr's valuation is also based on the assumption that the dollar will drop to US60c by 2009, and remain at that average for the 19-year life of the mine, Hallwright said in his research note.
He expected that Pike River's stock would reach a premium on listing, but said "subsequent volatility" could offer investors who waited "better entry opportunities".
Investors should not underestimate development risks, Lister said.
The mine won't produce coal until 2009, operating costs and the cost and difficulties of transporting the coal out of the mine were unknown, he said.
Pike River has said coal will be trucked to Greymouth and moved on two purpose-built self-propelled vessels to Port Taranaki for export to India, Japan, Brazil, Europe and other markets.
The mine is expected to produce one million tonnes of coal a year after 2009. More than 70 per cent of the mine's first three years' production has already been sold.
