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Australian Prairie sees coal price recovery ahead of Polish mine debut

Australian coal company Prairie Mining expects coal prices to rebound by the time it ramps up a new mine in south-east Poland, the company's CEO Benjamin Stoikovich told Reuters.

Prairie Mining plans to build a $684 million coal mine in Lublin at a time when slumping price and high production costs have pushed local miners to the brink of bankruptcy.

The company is betting a rebound in coal prices will occur when the low cost, high-tech mine nears completion in Eastern Europe's biggest economy, Stoikovich said.

He declined to give a detailed time frame but local media has reported the mine could start production in 2020.

"The nature of commodity markets is cyclical," he said in an interview. "Eventually, high cost mines will need to close down and prices will recover. I do not expect the coal oversupply currently experienced in Poland to last forever."

Prairie Mining sees its coal output in Poland at 6 million tonnes, which some experts say equals Poland's current coal surplus.

Stoikovich also said demand remains despite sluggish in economies across the European Union and that Prairie Mining would seek out new customers.

Prairie also sees production costs at $37 per tonne. This is far lower than costs of Poland's domestic miners such as Kompania Weglowa, which is around $72 per tonne.

"The demand for coal is still impressive," Stoikovich said. "Last year the European Union consumed over 700 million tonnes of coal. We will be targeting not only power producers, but also industrial companies."

Prairie Mining has secured up to A$83 million ($60.80 million) from UK private equity fund CD Capital to finance the mining project, for which it was granted exploration concessions by the government in 2012.

This means the company will not need to raise new capital from public markets when it debuts on the Warsaw and London stock exchanges by the end of the current quarter, Stoikovich said.

The Australian firm is competing for a mining concession in the area with Poland's Bogdanka, whose coal mines are nearby. ($1 = 1.3652 Australian dollars)

source: http://www.reuters.com