In recent weeks shares in Prairie Mining have been experiencing a bit of a rough ride on concerns about licence issues for their key coal asset in Poland. When we initiated coverage on Prairie in September 2017 we did point out that the company was a potential world-class hard coking coal supplier with two low cost projects in Poland to supply Europe’s leading steel makers. Additionally, we saw the company as a likely acquisition target.

In July 2015, Prairie Mining was granted the exclusive right to apply for the Mining Concession at Jan Karski until 2 April 2018. The Deposit Development Plan and the Spatial Development Plan were approved in May and August 2017 respectively. On 30 November 2017, Prairie submitted the Environmental and Social Impact Assessment (ESIA) which independent consultants confirmed met all the necessary requirements. As yet, the company has not received the necessary Environmental Consent decision and so has been unable to apply for a Mining Concession at Jan Karski.

On 03 April 2018, the company provided an update on the Jan Karski concession. Basically, Prairie has been waiting some while for the required Environmental Consent decision. The approval of Prairie’s Geological Documentation in 2015 also gave the company the legal right to apply for a Mining Usufruct Agreement over Jan Karski for an additional 12-month period beyond April 2018. This serves to stop any other parties being granted any licence over all or part of the Jan Karski concessions. Under Polish law, the Ministry of Environment (MoE) is strictly obligated, within three months of Prairie making an application for a Mining Usufruct Agreement, to grant the agreement. Legal advice provided to Prairie concludes that failure of the MoE to grant the company the Mining Usufruct Agreement is a breach of Polish law. As a consequence of this failure the company has now commenced legal proceedings against the MoE through the Polish courts in order to protect the company’s security of tenure over the Jan Karski concessions.

The feeling on the ground is that the delays of the MoE might be just down to inefficiency in a government department. As true world-class assets, these coal projects are important to Poland and so there is big local support for the jobs that they will provide along with the potential benefits to the local and national economies. The legal action very neatly brings these delays to the attention of the Polish people as well as the politicians. This latest news came just days after it was announced that the company disclosed a co-operation agreement with Jastrzębska Spółka Węglowa SA (JSW) concerning Prairie’s Jan Karski and Debiensko projects. Interestingly enough JSW which has a market cap in excess of £2 billion is 55% owned by the Polish Government.

Truth is that this latest event seems to be par for the course in being involved in high profile projects in Poland and such an event seems to pop up every couple of years and company has been here before. In September 2014, Prairie was advised that the Polish Ministry of the Environment had officially rejected an application from Lubelski Wegiel BOGDANKA S.A. for a mining concession over the company’s K-6-7 coal concession in Poland. The main point is that Prairie has successfully legally dealt with such an issue before.

We this believe that the current weakness could serve to provide a good buying opportunity once further clarification occurs.

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• Prairie Mining