Coking pure-play Bowen Coking Coal debuts amid high steel demand
Asia’s insatiable appetite for steel is showing no signs of waning and Bowen Coking Coal — which has debuted today on the ASX — is taking advantage with a suite of projects in the world’s leading region for high-quality coking coal.
Global crude steel production is at its highest levels since 2012, due largely to China’s focus on infrastructure and housing.
China’s “One Belt, One Road” initiative to link with countries along the Silk Road route — the brainchild of President Xi Jinping back in 2013 – will keep steel output at high levels.
That’s good news for coking coal producers such as Bowen Coking Coal, since coking coal is vital in steel production.
Steel demand has recently pushed coking coal prices as high as $US209 a tonne — up from $US150 in June and double the price of a few years ago.
Brisbane-based Bowen Coking Coal (ASX:BCB), founded in October 2016 as a subsidiary of Cape Coal, begins trading on the ASX today after a reverse takeover of Cabral Resources.
Bowen — which is one of the ASX’s only pure-play coking coal companies — raised $4.6 million at 2.3c per share for a fully diluted market cap of around $13.2 million.
Bowen’s key draw card is its coking coal projects in the Bowen Basin, one of the world’s leading regions for high quality coking coal.
Best coking coal in the world
“Australia’s got the best coking coal in the world in my opinion and is well placed to supply growing demand not only from China but India as well,” Bowen Coking Coal chief Gerhard Redelinghuys told Stockhead.
“The Bowen Basin is world renowned and it’s got the lowest freight differential in the market to China and India compared to competitors out there.
“Australia is also the largest supplier of seaborne coking coal in the world with the lowest distribution costs while production cost and capital expenditure have decreased significantly since 2012.”
The company’s wholly owned projects in the Bowen Basin include Cooroorah, Comet Ridge and Hillalong projects.
Bowen acquired Cooroorah after finalising an option agreement with Australian Pacific Coal.
The project covers 16.7 sq km in the central Bowen Basin and is down-dip from Wesfarmers Resource’s 12 million tonnes per annum Curragh mine.
The project already hosts a 125 million tonne resource (70Mt indicated and 55Mt inferred).
Exploration drilling a priority
The priority after listing will be to undertake exploration drilling at Cooroorah to analyse the coal quality and target the shallower area of the resource.
“The exploration on Cooroorah is a very important milestone for us,” Mr Redelinghuys said.
“Once we have completed the drilling we will seek to increase the JORC resource and we expect to have that all done before end of December,” he said.
JORC compliance refers to the mining industry’s code for reporting exploration results, mineral resources and ore reserves, managed by the Australasian Joint Ore Reserves Committee.
The holes will target seams of the Rangal Coal Measures, which are extensively mined in Bowen Basin to provide high quality coking, PCI and thermal coal for the export market.
At Comet Ridge, the approval process for a mining licence is well advanced. The project was granted an Environmental Authority in August 2016.
The company is seeking to review and update previous mining studies ahead of commencing a pre-feasibility study at the project early in 2018.
Comet Ridge covers 97.4 sq km and hosts a JORC resource of 8Mt measured, 9Mt indicated, 43Mt inferred, all at less than 50 metres deep.
Mineral resources are categorised in order of increasing geological confidence as inferred, indicated or measured.
Located in a good neighbourhood
It’s located in a good neighbourhood, only 8km west of BHP Billiton Mitsubishi Alliance’s 14Mtpa Blackwater coal mine on the southern central portion of the Comet Ridge.
Hillalong lies in the northern Bowen Basin and covers almost 50 square kilometres some 16km northwest of Rio Tinto’s 10Mtpa Hail Creek mine.
According to Bowen, the tenement is prospective for the Hynds seams which are extensively mined in the area by BHP and Rio Tinto to produce a high-quality coking coal.
No coal resource yet has been estimated over the area.
Mr Redelinghuys said the company was also on the look-out for acquisition opportunities.
“We are also looking at potential acquisitions which might complement our current assets and that’s also something that might be completed by the end of the year,” he said.
The board also has a wealth of experience. Mr Redelinghuys is managing director at Cape Coal and formerly South African-based Exxaro Australia.
Non-executive director Eddie King is a director of ASX-listed companies including European Cobalt, Lindian Resources and is a CPS Capital stockbroker.
Technical expert and Cape Coal director James Agenberg and Steve Formica, non-executive director of Lindian Resources, Mintails and Quest Minerals, will join the board as non-executive directors.
This special report is brought to you by Bowen Coking Coal.
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