Stock takes: Down by the river

The patience of at least some Pike River Coal investors must be wearing thin with the company, which has yet to produce any coal, once again tapping them for cash.

This time it's $45 million via a one-for-five rights and bonus option issue to fund it through delays to production and help offset additional costs associated with a rock fall at its mine.

Coal production has been delayed by yet another two to three months and the company's first sales of its coking coal, which is used in steel production, are not now expected until September.

The company looks to have missed out on the high prices for its product that were available until the credit crunch, and the market keeps getting softer.

Australian coking coal exports reportedly collapsed in January with miners posting their weakest sales in more than four years due to a lack of demand from Japanese, Korean and European steelmakers.

Hard coking coal exports, dominated by the BHP Billiton Mitsubishi Alliance, fell 36.3 per cent in January compared with the previous January and 23.8 per cent compared with December, a UBS report showed.

The Indian market was the only one to accept more coal shipments from Australia, but BHP reportedly had to halve its price to about US$150 ($292.50) a tonne to encourage steelmakers to accept the product.

UBS estimates the hard coking coal price will settle at just US$85 a tonne this year. Pike River had estimated prices of about US$95 a tonne at the time it was listed in 2007.

However, Pike River chief executive Gordon Ward says UBS is alone with such a low forecast. He reckons the consensus is that prices will settle somewhere between US$120 and US$140 a tonne.

On the other hand the delays to production mean that already inked contracts to supply Japanese customers at fulsome prices around US$300 a tonne will have to be renegotiated at lower prices. The dollar has fallen heavily since those contracts were signed which should take away a little of the sting.

Pike River shares rose 2c to 75c yesterday.

MONEY FOR JAM

Meanwhile, NZ Oil & Gas, which Pike River was spun out from, raised a few eyebrows with the announcement it was planning to "partly underwrite" Pike's rights issue.

That's because it is just taking up its pro rata allocation of 30 per cent. Nevertheless it will receive an underwriting fee for doing so.

Public affairs manager Chris Roberts was unable to tell Stock Takes what that fee was although he did say Pike River's next two biggest shareholders would not be exercising their rights and lead manager McDouall Stuart was putting together an underwriting consortium to take up those and any other rights not exercised.

Stock Takes understands a similar arrangement for Pike's last rights issue saw consortium members including some high net worth individuals turn a tidy profit when Pikes shares took off afterwards thanks to the commodities boom. Ah ... those were the days.

Andrew McDouall of McDouall Stuart said it was not unusual for large shareholders to receive a fee in return for the risk they took on by committing to take up their whole pro rata entitlement weeks before the issue or even the publication of the prospectus.

NZOG closed up 1c at $1.43 yesterday.

BIG GUNS

Provenco's Jim Doyle stepped down last week not just as chief executive, as was expected, but also from the board, having decided "to focus on other business interests".

Market sources suggest his departure is symptomatic of what they say is intrigue surrounding the company at present.

Cruelly for Doyle, since his departure, the company's shares have enjoyed something of a respite from their long-term decline.

Chairman Rick Christie said Doyle had been "the appropriate person to drive and lead the restructure" since the eftpos company merged with rival Cadmus in May last year.

The company reported a $25.6 million loss in the six months to December 31 from a $4.6 million loss in the same period a year ago but got some breathing space from its bankers.

It is currently looking at further asset sales and working on a capital restructuring.

Although the company's performance has been fairly woeful it's interesting to note its investors include some big canny names including the Todd family, Peter Maire, Stephen Tindall and Allan Hubbard.

The way Stock Takes hears it, it's the presence of a number of other strong investors that has probably prevented a particular large investor from moving to control of the company on far more favourable terms than the current pricing suggests would be realistic.

Provenco closed up 0.5c at 6c yesterday.

OUT OF ITS SHELL

Shell's possible sale of its downstream business here could pump up wider interest in the thinly traded New Zealand Refining.

Shell's review will take several months, but if it does quit its 17.1 per cent stake in the refining company, worth around $270 million, there are three options identified by analysts McDouall Stuart.

One option would be to sell to one of the existing four cornerstone shareholders - BP, Mobil, Chevron or investment company Emerald Capital - but as with Shell, there are questions about how committed the oil giants are to this part of the world.

Another possibility would be the introduction of a new cornerstone.

Thirdly, NZR could buy Shell's stake, initiating a capital reconstruction. This could see a concentration of the capital base or, more exciting for investors, see it issue further capital to the market.

Just 35 million of its 240 million shares are in free float and in the past 12 months just 7.4 million of these were traded.

McDouall Stuart expects NZR to continue with its strong performance over the next two years, hence a "hold" recommendation, but has concerns about refining margins in the longer term.

NZ Refining rose 19c to $6.90 yesterday.

YOU SAYIN' I GOT ISSUES?

Corporate bond fever is racing through the proverbial "mum and dad"' investor community at present, and why not?

We're talking about some well-known and trusted names offering returns far above those that can be obtained from the banks at present.

However, one very experienced fixed interest specialist this week added his voice to those expressing concerns that retail investor enthusiasm for these securities is looking overdone.

For one thing, he says, watch out for governments looking to raise huge amounts of cash to try to stimulate their economies over the next few years.

What's more, governments will be competing for cash with banks whose own offerings will more often than not be carrying a guarantee from the same government. In other words, expect interest rates to go up. Although 8 per cent or so looks good now, it might not in a couple of years.

Also, the returns being offered in New Zealand are hardly fulsome compared to similarly rated issues overseas.

Finally, look at who's buying these things. By and large there won't be many institutional investors. Does that tell you something?

STEWART V CRAMER IN BATTLE OF THE TV HOSTS

US comedian Jon Stewart, whose very funny current affairs comedy programme The Daily Show is shown late at night on C4, has been in particularly good form of late when lambasting Wall St's mismanagement of Americans' savings.

A feud has broken out between Stewart and the abrasive host of cable channel MSNBC's Mad Money show Jim Cramer after Stewart made fun of Cramer's apparent endorsement of Bear Stearns days before the investment bank failed last year.

Cramer hit back in appearances on other shows and in print, and the tit-for-tat continued with an unrepentant Stewart having another go.

Given that things were starting to get a bit personal it's somewhat surprising that Cramer agreed to appear as a guest on Stewart's show last night.

Apart from the fact that it does manage to get some very high powered and controversial guests, one of the joys of the Daily Show is that it screens here the day after it is aired in the US.

Assuming C4 doesn't do anything crazy with its schedule, the Stewart-Cramer face-off should be on tonight. Otherwise it will be available via Comedy Central's website.

Given both men are loud, opinionated and quick witted it should be worth checking out.