Lower coal prices for its 2008 contract year, which begins on April 1, 2007, means less money coming in for Fording Canadian Coal Trust (FDG).
While the 2008 price of US$91 per tonne Fording has negotiated with its customers is US$16 below the current contract, Desjardins Securities analyst John Hughes said he expected the settlement price would come in at US$95.
Meanwhile, Fording’s guidance for coal sales for the 2007 calendar year was reduced by 1.5 million tonnes to a range of 21.5 million to 23 million tonnes.
Guidance for first quarter shipment volumes for the Elk Valley Coal Partnership, which is Fording’s primary asset and includes five producing metallurgical coal mines in western Canada, was in line with estimates, Mr. Hughes said in a note to clients.
As a result of these new figures, his 2008 cash distribution estimate for Fording is C$3.05 per unit.
Mr. Hughes lowered his target price on Fording to C$27.75 per unit from C$29.10, while reiterating a “hold” rating on the stock.