Adaro redenominates financials and increases resource base - CLSA

The company has also redenominated financial statements into USD from IDR.
A summary of the group financial position is shown in the table below.
* sales volume was up QoQ but down YoY due to weather-related challenges, the
num,ber of rain days was 15% higher in 1Q11 over the same period last year.
* That said, the company is sticking with its forecast of 46-48mt for FY11
* COGS was high caused by higher mining costs which rose 15% YoY and
accounts for 88% of COGS
* Operating expenses rose 50% YoY and are one third of our FY forecast
* Net income is up 11% YoY and 16% of our FY forecast
* Last, total resources have been increased to 4.4bn tonnes (up 58%) and
reserves to 938mt (up 16%)

Investment thesis.
First quarter earnings are seasonally low; 1Q10 earnings accounted for only 20%
of full year earnings. That said,we will be making changes to our earnings
forecast including redenominating the model to USD. Our long term thesis
remains intact, however, we will be adjusting upwards our near term cost
assumptions. The company has committed itself to construction of the
overburden conveyor system, costing US$170m and is expected to be operational
by 1H13. However, the overland conveyor project is on hold. This was to
transport coal 30km along the road route to the river for barging. Adaro has only
secured 70% of the land required. This means coal will continue to be trucked the
83km to the river.
Longer term, the overburden conveyor system will come operational and lower
operating costs. In addition, the higher reserve base has increased the reserve
life to 20 years at current output (48mt). This will put the group in a strong
position to benefit from the coal supercycle.