Westar gets price increase from Japanese coal buyers

A $2.90(US) price increase has been won by Westar Mining (TSE) from its Japanese customers for the coal year commencing April 1. This brings the price for metallurgical coal to $46.90 per tonne.

Westar’s Balmer mine has contracted to supply 2.9 million tonnes, an increase of 600,000 tonnes from agreed volumes for the contract year ending March 31. Greenhills mine contract volumes remain unchanged at 300,000 tonnes of metallurgical coal. Deliveries to Japanese steel mills in 1988 will represent about 37% of Westar’s production, up from 34% last year.

President Peter Dolezal expressed concern that the price increase isn’t enough to cover the negative effect of the strengthening Canadian dollar. “Although the tonnage increases are of assistance, their effect is minor relative to the disastrous $5-per-ton reduction imposed by the Japanese steel mills last year,”he says.

Industry watchers had suggested an $8 to $10 price increase is needed this year just to get back to 1986 revenues.

Dolezal adds that “financial improvement resulting from the company’s new contract with its Japanese customers does not assure Westar’s ability to meet the retraction obligation on its $2.5625 Cumulative Redeemable Class A Preferred shares, series 1 in April, 1989, and still requires a restructuring of the company’s bank debt as soon as possible.”

Discussions with the Bank of Montreal, the main lender, are continuing.