JSW, the European Union’s biggest coking coal producer, said it wants to focus solely on the fuel used in steelmaking and exit the more polluting thermal coal.
Coking coal accounts for 80% of JSW’s output, and thermal coal for 20%. Thermal coal, used for power, is struggling to attract investment because of concerns about the environment, but coking coal is still viewed as a strategic mineral.
“JSW will aim to focus 100% on the production of coking coal… Thermal coal is a side effect in our production process,” JSW’s Chief Financial Officer Radoslaw Zalozinski told Reuters.
JSW has been hit hard by the coronavirus pandemic, as it faced falling demand and numerous covid-19 infections among miners, forcing it to temporarily close some mines earlier this year.
It hopes to receive 1.75 billion zlotys ($462 million) in financing from state-run fund PFR, but first needs to obtain the approval of its debtholders for increasing the debt.
“This is the condition precedent,” Zalozinski said. Banks that have been financing JSW include state-run PKO BP, Pekao and BGK as well as China’s ICBC bank .
The European Union’s decision to keep coking coal on its list of critical raw materials should have a positive impact on the talks about PFR financing, Zalozinski said.
Talks on other financing options, including new bond or share issues, are out of the question for now.
“I think that the existing debtholders would not react positively if we were to incur additional debt. When it comes to a share issue, I think we would have to wait for a better valuation of the company,” Zalozinski said.
Demand for coking coal is rebounding, he said.
“For JSW the rebound in demand is reflected in the price of coking coal – currently it is $140 compared to $100 per ton of premium coal. Is this price sustainable in the long run? We expect it to be, as there were previously unreasonable declines in this market and now we are dealing with a recovery.”
Only three employees of JSW mines have currently tested positive for covid-19 but the virus is spreading again in Poland and JSW cannot completely rule out that it may be forced to temporarily close mines again.
“We cannot say with certainty that there is no longer any risk of mine closures. We have schools open, autumn and winter are ahead of us. I would not exclude anything,” Zalozinski said.
($1 = 3.7881 zlotys)
(By Agnieszka Barteczko; Editing by Susan Fenton)