• Anglo American sells Queensland coal mines for up to US$3.8bn
  • Buyer Peabody says Australia is the place to be to supply key Asian market
  • Iron ore downside risks limited with steelmakers facing US tariffs: ANZ

 

Bulk Buys looks at this month’s big stories in coal and iron ore

 

Anglo American has ended the more than six-month-long process to divest its coal division, realising US$3.8 billion by trading its major Grosvenor, Moranbah North, Dawson and Capcoal mines in a bloc to US-listed thermal coal producer Peabody Energy.

The sale of its Queensland coal network comes after it shifted minority interests in the Jellinbah East and Lake Vermont mines to billionaire majority owner Sam Chong’s Jellinbah for US$1.1bn.

It comes at a delicate time, with Anglo facing a revival of takeover talk as the standstill holding its stalker BHP (ASX:BHP) back under UK takeover laws passes ahead of this weekend.

BHP walked away after Anglo played hardball on a $75 billion scrip bid in May, but CEO Mike Henry is believed to have travelled to South Africa to meet with major shareholder the South African Public Investment Fund and the Big Australian quickly moved to walk back language from chairman Ken MacKenzie at its recent AGM that suggested it no longer intended to bid.

The Aussie miner wants the low-cost Peruvian and Chilean copper in Anglo’s portfolio. It recently spent US$3.2 billion to take a half stake in development assets alongside Lundin Mining in Argentina’s Vicuna region and revealed plans to spend up to US$15bn to maintain copper output into the 2030s at Chile’s Escondida and Pampa Norte mines.

A presentation given to investors on last week’s site visit tellingly put the phrase ‘operational excellence’ front and centre, a key pitch earlier this year to Anglo shareholders that BHP could do a better job than the London-listed miner with its asset base.

Taking a step back from that particular diversion, what does Anglo’s sale mean for met coal markets?

 

Peabody’s nerfect

The response from investors was par for the course when it comes to acquisitions these days, with Peabody stocks down over 5% and Anglo shares up 1.36% on international markets overnight.

 


Some large Anglo investors were positive early doors.

The deal comprises:

  • US$2.05bn at the close and US$725m over multiple years after;
  • another US$550m in a price-linked earn-out where premium hard coking coal prices must be over US$240/t; and
  • US$450m, contingent on the reopening after a fire back in June, for the Grosvenor mine – paid in two instalments: US$250m on its first coal sale or 1.5Mt ROM coal production, and US$200m on the second anniversary of its reopening.

Peabody may realise US$455m to issue to Anglo from the sale of the Dawson mine to Indonesia’s BUMA.

It says the mines will produce around 11.3Mt of mostly hard coking coal in 2026, lifting its met coal output from 7.4Mt in 2024 to 21-22Mt in 2026.

Peabody CEO Jim Grech said the deal was made attractive given the assets’ proximity to Asia, now the driving force in the steelmaking coal industry.

“We likely don’t need to convince you that Asia is a choice destination for hard coking coals, but consider this statistic: During the decade ending in 2023 Asia steel demand more than doubled,” he said on an investor and analyst call this morning Australian time.

“Steel demand in the rest of the world shrunk slightly during the same time.

“So it’s helpful to target Asian customers, and even more helpful when you are located nearby – considering ocean freight rates to India over the past five years, US and Canadian coals would face US$21/t and US$8/t of additional ocean freight costs relative to Australia, respectively making Australian coals more competitive on a landed cost basis.”

Stanmore Coal (ASX:SMR) meanwhile, another coking coal producer understood to be in the bidding until late in the piece, saw its shares rise 3.67%.

Aussie companies in the bidding process including Yancoal Australia (ASX:YAL), which was likely to run into Foreign Investment Review Board hurdles, had wound back returns to investors to keep their powder dry for the bidding.

Meanwhile, Anglo boss Duncan Wanblad said AAL is expecting to demerge its South African platinum business by mid-2025 with diamond company De Beers to follow.

 

ASX coal stocks

CODE COMPANY PRICE WEEK % MONTH % 6 MONTH % YEAR % YTD % MARKET CAP
NAE New Age Exploration 0.006 0% 0% 71% 9% 0% $ 10,763,393.46
CKA Cokal Ltd 0.07 -8% -13% -33% -30% -42% $ 75,526,428.60
BCB Bowen Coal Limited 0.008 14% -33% -86% -93% -92% $ 23,443,917.62
SVG Savannah Goldfields 0.022 5% 5% -21% -61% -56% $ 5,902,783.24
GRX Greenx Metals Ltd 0.795 4% 18% -10% -15% -14% $ 222,507,516.06
AKM Aspire Mining Ltd 0.265 -17% -12% 29% 244% 152% $ 134,523,801.03
AVM Advance Metals Ltd 0.043 59% 79% 79% -22% 17% $ 7,245,464.48
YAL Yancoal Aust Ltd 6.56 1% 7% 18% 32% 33% $ 8,767,717,861.68
NHC New Hope Corporation 4.88 -1% -6% 7% -16% -5% $ 4,159,050,482.88
TIG Tigers Realm Coal 0.003 0% -25% -33% -40% -45% $ 39,200,107.10
SMR Stanmore Resources 3.13 1% -2% -6% -19% -22% $ 2,875,439,312.46
WHC Whitehaven Coal 6.92 5% -4% -10% -5% -7% $ 5,822,741,456.64
BRL Bathurst Res Ltd. 0.7325 -3% -7% -13% -24% -24% $ 140,171,038.85
CRN Coronado Global Res 1 -5% -17% -20% -43% -43% $ 1,651,306,924.05
JAL Jameson Resources 0.05 -22% -12% 61% 22% 11% $ 31,147,399.42
TER Terracom Ltd 0.17 -15% -17% -31% -60% -60% $ 136,164,259.95
ATU Atrum Coal Ltd 0.004526 0% 0% 0% 0% 0% $ 12,000,798.96
MCM Mc Mining Ltd 0.125 -4% -14% -22% -4% -17% $ 59,514,418.88
DBI Dalrymple Bay 3.35 1% 4% 20% 24% 25% $ 1,640,971,117.77
AQC Auspaccoal Ltd 0.135 8% -15% 60% 0% 41% $ 90,592,460.24
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Is China stimulus panacea for iron ore?

There’s plenty of negative energy around iron ore for a variety of reasons, notably a long period of negative margins at steel mills this year and a property crisis in China.

Singapore futures tell a story of neither here nor there for iron ore prices, which are stuck in neutral mode at around US$103/t.

That’s brighter at least than the US$89/t seen before stimulus measures started to be rolled out in mid-September by the Communist Party.

While those have disappointed to an extent since, the supply and demand side of things for iron ore has looked a little better than it did through the middle of the year.

MySteel says shipments from Australia and Brazil have dropped for three straight weeks, though steel output in China also dipped in mid-November to 2.08Mt/d according to the CISA (1.1% up YoY for November 11-20).

Steel profitability has been waning again, MySteel reported.

But some analysts remain optimistic the downside is limited.

ANZ’s Daniel Hynes and Soni Kumari said in a note this month steel demand growth from non-property sectors was picking up, while steelmakers could look to ratchet up output ahead of US tariff increases.

“Rising Chinese steel exports could also provide some support. Trump’s recent election victory has renewed concerns of another global trade war. This could see Chinese steel producers trying to ‘front run’ a rise in tariffs by increasing exports over the next few months,” they wrote.

“We think it is reasonable to assume these factors will keep steel output elevated. High frequency data suggest the normal seasonal decline in output is not a given. This could be aided by the relatively low levels of steel inventories and better steel mill margins.

“With Beijing quite open about keeping its powder dry ahead of potentially higher tariffs in 2025, we think the possibility of additional stimulus measures is high. This should keep sentiment in the iron ore and steel industry relatively buoyant.

“If supported in the short term by a continued improvement in economic data, we think the downside risks for iron ore are relatively limited. We reiterate our short-term price target of US$95/t.”

On the equity front some interesting news at the small end of town in the past couple weeks, with Vale taking a look at investing in Cyclone Metals (ASX:CLE) Iron Bear magnetite deposit in Canada as it looks to tighten its grip on the supply of iron ore grades for low emissions direct reduced iron plants.

And Macro Metals (ASX:M4M) announced a deal with privately owned WA Limestone to access logistics and accommodation infrastructure for its Goldsworthy East iron ore project. Located next to BHP’s historic high grade Mt Goldsworthy mine, the prospect is interesting given its close proximity to Port Hedland.

ASX iron ore stocks

CODE COMPANY PRICE WEEK % MONTH % 6 MONTH % YEAR % YTD % MARKET CAP
ACS Accent Resources NL 0.006 0% 0% -14% -25% -25% $ 2,838,763.70
ADY Admiralty Resources. 0.006 -14% -14% -40% -14% -14% $ 18,406,355.79
AKO Akora Resources 0.12 0% -14% -25% -24% -19% $ 15,012,331.32
BCK Brockman Mining Ltd 0.016 14% 14% -27% -45% -43% $ 148,483,714.10
BHP BHP Group Limited 39.89 -1% -6% -11% -16% -21% $ 203,970,827,757.60
CIA Champion Iron Ltd 5.54 0% -5% -25% -28% -34% $ 2,881,475,565.56
CZR CZR Resources Ltd 0.225 2% -8% -26% -6% 7% $ 52,081,622.34
DRE Dreadnought Resources Ltd 0.014 -7% -13% -18% -56% -53% $ 56,291,250.00
EFEDA Eastern Resources 0.034 -15% -3% -51% -69% -58% $ 4,222,617.96
CUF Cufe Ltd 0.006 -14% -25% -54% -50% -57% $ 8,020,049.19
FEX Fenix Resources Ltd 0.27 6% 0% -16% 4% -5% $ 187,360,659.20
FMG Fortescue Ltd 18.28 2% -4% -32% -27% -37% $ 56,591,375,192.84
RHK Red Hawk Mining Ltd 0.81 -2% 1% -6% 27% 37% $ 161,847,297.99
GEN Genmin 0.035 -19% -29% -75% -78% -78% $ 32,536,971.88
GRR Grange Resources. 0.24 0% -13% -41% -45% -48% $ 283,547,981.01
HAV Havilah Resources 0.195 0% -9% -7% -26% 0% $ 67,851,259.20
HAW Hawthorn Resources 0.051 -4% -12% -25% -46% -45% $ 16,415,765.04
HIO Hawsons Iron Ltd 0.02 0% -9% -35% -55% -57% $ 22,363,030.10
IRD Iron Road Ltd 0.06 -2% -8% -37% -23% -10% $ 50,759,599.62
JNO Juno 0.024 -4% -11% -52% -73% -78% $ 4,366,686.24
LCY Legacy Iron Ore 0.01 -20% -20% -31% -39% -39% $ 97,620,425.84
MAG Magmatic Resrce Ltd 0.041 -7% -32% -52% -42% -16% $ 17,099,079.27
MDX Mindax Limited 0.04 -2% 8% 29% -17% -33% $ 86,048,918.76
MGT Magnetite Mines 0.14 0% -18% -64% -54% -55% $ 15,572,408.36
MGU Magnum Mining & Exp 0.012 -8% 0% -14% -56% -57% $ 8,093,614.03
MGX Mount Gibson Iron 0.295 -3% -6% -35% -45% -46% $ 364,585,022.70
MIN Mineral Resources. 33.27 -6% -2% -56% -48% -52% $ 6,575,512,489.84
MIO Macarthur Minerals 0.051 -9% -2% -28% -62% -59% $ 11,181,268.56
PFE Panteraminerals 0.02 -9% -29% -57% -65% -60% $ 9,475,673.76
PLG Pearlgullironlimited 0.017 0% -6% -26% -58% -43% $ 3,477,210.43
RHI Red Hill Minerals 4.44 2% 12% -19% 17% 10% $ 280,878,997.50
RIO Rio Tinto Limited 117.12 1% -1% -12% -8% -14% $ 43,324,644,335.94
RLC Reedy Lagoon Corp. 0.002 -33% -33% -50% -71% -60% $ 1,523,413.35
CTN Catalina Resources 0.0035 17% 0% -13% 17% -22% $ 3,715,460.68
SRK Strike Resources 0.031 -6% -14% -28% -40% -37% $ 9,363,750.00
SRN Surefire Rescs NL 0.0035 0% -42% -63% -65% -59% $ 6,952,077.35
TI1 Tombador Iron 0.35 0% 0% 0% 0% 0% $ 30,213,639.40
TLM Talisman Mining 0.22 2% -8% -37% 22% -6% $ 39,547,273.29
EQN Equinoxresources 0.15 -9% -27% -62% -40% -50% $ 17,958,250.44
AMD Arrow Minerals 0.0015 -25% -25% -63% 0% -70% $ 19,835,441.68
CTM Centaurus Metals Ltd 0.44 1% -4% -6% -11% -18% $ 223,515,545.85
LM1 Leeuwin Metals Ltd 0.073 0% 0% 4% -68% -48% $ 3,420,171.98
M4M Macro Metals 0.008 14% -20% -80% 100% 167% $ 28,984,855.00
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