Shock departure at Stanmore
Wednesday 07 December 2016
Founder, former CEO, and third largest shareholder of Stanmore Coal Nick Jorss has made a surprise exit from the board of the company he created this week.
His decision to resign has surprised a few in the market and came just a day before he was scheduled to stand for reelection as possibly deputy chairman at the AGM.
In a statement, Stanmore said his resignation would take immediate effect.
“Nick Jorss has resigned as a director of the company effective today,” they said.
“Mr Jorss will continue to assist with the transition of new Managing Director Dan Clifford over the coming months, and remains a significant shareholder in the company.
“He will leave the company to pursue other business interests.”
The last twelve months have been good for Stanmore, with their share price increasing more than threefold off the back of vastly improved coal prices, and their ability to start exporting coal just six months after buying the Isaac Plains Mine (IPM) in a complicated deal.
However, the restart has not been without its problems.
Chairman Neville Sneddon said they missed their high wall mining targets by around a third, and wet weather has cut production at the above ground operations.
“The open cut has not been without its challenges,” he said.
“Overall, open cut production has been below plan due to changes in the mining path and minor weather timing impacts.
“However open cut production remains in line with previous guidance for the year.”
The company has also had some issues with its dragline, and has not been able to get consistent high performance from the wash plant, although they have noted their knowledge of the site has “improved”.
The biggest implication for the production stoppages is that they have not been able to fulfil all their export sales contracts - which were set at very low prices negotiated before the current price rally.
Which Stanmore says means they have not benefited from the booming spot market coal prices.
“The management of working capital has been challenging in recent months due to some variability in shipping schedules and the nature of our semi-soft coking coal contracts whereby carry-over tonnes need to be delivered before the price resets to the latest quarterly benchmark,” Stanmore said.
“The recent months have therefore been the tightest for the company resulting in the drawdown of $US6 million from the Taurus working capital facility”
Adding further to the cash flow pressure has been the payment of royalties to the mine's former owners.
Under an agreement negotiated when they purchased IPM, Stanmore pays a fee when the coal price reaches A$160 (HCC Index).
With the price tearing past that level, Stanmore have effectively been getting paid low prices, but paying a royalty based on high prices.
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