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Bulk Buys: Anglo walking on hot coals as fire hits sale process
Mining
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- Anglo coal mine fire has prices running er… hotter
- Fastmarkets steel markets expert Paul Lim says the closure could delay the planned sale of Anglo’s coal division, but world class assets will still attract buyers
- Iron ore baby bounces on stronger Chinese property data, but steel fundamentals are crook
Mining is an upside-down world, which is why news that is so obviously bad can be good from another person’s perspective.
The Grosvenor mine fire which shut Anglo American’s newest coal development on Saturday – expected to result in a months long closure – was manna from heaven for its competitors.
Not least will be BHP (ASX:BHP), which argued it’d do a better job running Anglo’s assets before walking off as the target pushed for progressively more generous terms in a two month long takeover struggle.
(BHP, of course had three deaths in 12 months from early 2023 to 2024 across its sprawling Australian portfolio, so its safety record is up in the air right now.)
There has so far, thankfully, been no injuries at Grosvenor. The mine was already likely to see reduced output in the second half on account of a longwall move and was expected to deliver 2.3Mt in the first half and 3.5Mt of Anglo’s total 15-17Mt steelmaking coal output in 2024.
Analysts at Jefferies reckon it’s about 30% of the value of the ~US$4.5b portfolio.
But Anglo’s defence plan against the BHP bid had been to sell off the coking coal mines to raise cash for investing in its flagship Tier-1 copper assets.
Those coal assets could now come cheaper, if someone is willing to bet on them with regulatory and safety concerns to consider.
The biggest winners here are BHP and its fellow Queensland met coal miners: Whitehaven Coal (ASX:WHC), Coronado Global Resources (ASX:CRN) and Stanmore Coal (ASX:SMR).
Stanmore itself had to announce the closure of the Mavis underground mine on Friday, which doesn’t have the mine life to support reinvestment at current prices.
But after months in the doldrums, impacted by waning sentiment in Chinese and global steel markets, the Grosvenor disruption has met coal markets surging again, up 9% in Singapore on Monday to US$254/t.
That surge has Anglo’s peers humming, with Whitehaven hitting a roughly 18 month high yesterday, just months after acquiring BHP’s Blackwater and Daunia mines and becoming a majority met coal miner by revenue.
No force majeure
Anglo American is reportedly well stocked for July deliveries and is yet to declare Force Majeure with any of its customers, but the futures move gives a hint that traders are expecting shortages as August and September contracts are drawn.
Fastmarkets regional editor, steel and ferroalloys, Paul Lim, said the biggest impact would be felt by customers in India, who have few long-term contracts.
If Japanese, Korean and Taiwanese customers saw a shortfall they could also put higher bids into the spot market from August.
“Some of the Indian mills do not have term contracts for Australian coals. Secondly, it will be the JKT mills – Japan, Korea and Taiwan,” Lim told Stockhead.
“Some of them don’t take sanctioned cargoes, like Russian, so they depend on Mongolian (and) they depend a lot on Australian coals especially as Australian coals are also very near to them, so it’s a good supply chain for them.
“They may see supply shortfalls out of JKT, and when that happens you may see JKT becoming more active buying in the spot market, which is why traders are also looking to cover more August positions.”
While the fire is likely to delay the sale, Lim believes the world class nature of Anglo’s portfolio means it will attract interest regardless. Anglo’s ~16Mtpa Bowen Basin suite includes the 88% owned Moranbah North and Grosvenor underground operations, plus Capcoal, Aquila and Dawson.
In a world where few new coal mines are being approved, it’s one of the few opportunities to secure premium hard coking coal supplies, despite the persistent methane issues.
“It will certainly delay their plans a little bit, especially if Anglo is not able to confirm how much output Grosvenor can eventually supply, or the kind of checks that the Queensland government has to do on the coal mine before they attempt to sell it again,” Lim suggested.
“However, Moranbah North and Grosvenor are world class assets, so there will still be interest for these assets. It’s just a matter of time on when the sales can proceed.
“I already know that there are very big companies out there looking to acquire these assets, and a fire will certainly delay but it’s not going to make it much less attractive, I feel.”
The Anglo supply concerns sent Whitehaven shares to a roughly 18 month high of $8.56 yesterday, with Coronado also up 12.5% over the past two days. BHP shares were largely unchanged while Anglo was down 2.4% on Monday in London.
ASX coal stocks
Scroll or swipe to reveal table. Click headings to sort.
| CODE | COMPANY | PRICE | WEEK RETURN % | MONTH RETURN % | 6 MONTH RETURN % | YEAR RETURN % | MARKET CAP |
|---|---|---|---|---|---|---|---|
| NAE | New Age Exploration | 0.0035 | 17% | -13% | -42% | -30% | $ 6,278,646.19 |
| CKA | Cokal Ltd | 0.096 | 4% | -4% | -17% | -20% | $ 101,421,204.12 |
| BCB | Bowen Coal Limited | 0.056 | 6% | -14% | -43% | -64% | $ 168,032,324.38 |
| SVG | Savannah Goldfields | 0.019 | -5% | -32% | -62% | -81% | $ 5,340,613.40 |
| GRX | Greenx Metals Ltd | 0.875 | -2% | -3% | -9% | -22% | $ 244,038,403.00 |
| AKM | Aspire Mining Ltd | 0.35 | -4% | 63% | 218% | 400% | $ 177,672,944.75 |
| AVM | Advance Metals Ltd | 0.026 | 13% | 8% | -29% | -80% | $ 3,926,960.85 |
| YAL | Yancoal Aust Ltd | 7.02 | 12% | 9% | 35% | 53% | $ 9,137,440,904.04 |
| NHC | New Hope Corporation | 5.17 | 8% | 4% | -3% | 7% | $ 4,311,210,866.40 |
| TIG | Tigers Realm Coal | 0.003 | 0% | -25% | -40% | -40% | $ 39,200,107.10 |
| SMR | Stanmore Resources | 3.68 | 5% | 12% | -9% | 43% | $ 3,353,176,878.48 |
| WHC | Whitehaven Coal | 8.59 | 12% | 7% | 11% | 28% | $ 6,801,564,373.92 |
| BRL | Bathurst Res Ltd. | 0.8 | -2% | -5% | -17% | -18% | $ 155,001,421.80 |
| CRN | Coronado Global Res | 1.34 | 12% | 20% | -24% | -13% | $ 2,162,625,311.70 |
| JAL | Jameson Resources | 0.04 | 8% | 29% | 29% | -32% | $ 17,606,308.39 |
| TER | Terracom Ltd | 0.23 | 15% | 10% | -47% | -45% | $ 184,222,234.05 |
| ATU | Atrum Coal Ltd | 0.004526 | 0% | 0% | 0% | 0% | $ 11,966,853.96 |
| MCM | Mc Mining Ltd | 0.135 | -10% | -13% | -10% | 4% | $ 55,891,802.12 |
| DBI | Dalrymple Bay | 3.04 | 4% | 10% | 12% | 15% | $ 1,477,369,767.66 |
| AQC | Auspaccoal Ltd | 0.071 | 1% | -8% | -32% | -44% | $ 43,771,675.77 |
Iron ore turns
A 36% month on month lift in new home sales in June in China underpinned a 3% run in iron ore prices on Monday, despite coming in at a 17% drop year on year.
Bloomberg attributed the minor turnaround, important for iron ore traders hoping for an improvement in downstream steel demand, to relaxed rules on down payments in Shanghai, Shenzhen and Guangzhou, which have now been copied in Beijing.
The shift will mean little for met coal demand. Australian producers are largely selling to India now, with China’s previous Aussie purchases displaced by imports from Mongolia and Russia.
But China remains the gravitational force of the iron ore market, absorbing around four out of every five tonnes shipped from the Pilbara.
Singapore futures were down slightly to US$109.45/t at 4pm AEST yesterday.
Fundamentals in the Chinese steel and iron ore market have been crummy, with trader steel stocks rising for four weeks straight and port stocks 16% up year on year at 149.3Mt on June 27 according to MySteel.
Rebar stocks have normalised to around 9.4Mt after climbing as high as 14.4Mt in March, but are well above levels of around 6Mt seen at the end of 2023.
ASX iron ore stocks
Scroll or swipe to reveal table. Click headings to sort.
| CODE | COMPANY | PRICE | WEEK RETURN % | MONTH RETURN % | 6 MONTH RETURN % | YEAR RETURN % | MARKET CAP |
|---|---|---|---|---|---|---|---|
| ACS | Accent Resources NL | 0.007 | 0% | 0% | -13% | -36% | $ 3,311,890.98 |
| ADY | Admiralty Resources. | 0.011 | 22% | 57% | 83% | 83% | $ 17,924,213.34 |
| AKO | Akora Resources | 0.15 | 0% | -14% | 1% | -11% | $ 18,073,106.40 |
| BCK | Brockman Mining Ltd | 0.019 | 6% | -5% | -32% | -41% | $ 176,324,410.49 |
| BHP | BHP Group Limited | 43.16 | 0% | -3% | -15% | -4% | $ 219,597,284,376.10 |
| CIA | Champion Iron Ltd | 6.5 | 2% | -7% | -25% | 7% | $ 3,372,837,516.51 |
| CZR | CZR Resources Ltd | 0.275 | -7% | 6% | 31% | 57% | $ 67,184,374.11 |
| DRE | Dreadnought Resources Ltd | 0.021 | -9% | 24% | -28% | -60% | $ 73,774,532.16 |
| EFE | Eastern Resources | 0.005 | 0% | -17% | -38% | -50% | $ 6,209,732.31 |
| CUF | Cufe Ltd | 0.013 | 0% | -7% | -7% | -7% | $ 17,356,460.75 |
| FEX | Fenix Resources Ltd | 0.335 | 6% | -4% | 14% | 18% | $ 225,750,824.00 |
| FMG | Fortescue Ltd | 21.57 | 0% | -13% | -27% | -3% | $ 66,998,276,615.68 |
| RHK | Red Hawk Mining Ltd | 0.8 | -5% | -8% | 31% | 82% | $ 151,856,724.04 |
| GEN | Genmin | 0.125 | 9% | 4% | -22% | -17% | $ 89,079,826.68 |
| GRR | Grange Resources. | 0.385 | 7% | -1% | -25% | -28% | $ 439,788,705.24 |
| GWR | GWR Group Ltd | 0.086 | -1% | -11% | -9% | 34% | $ 27,624,632.33 |
| HAV | Havilah Resources | 0.19 | 9% | -14% | -3% | -12% | $ 61,744,645.95 |
| HAW | Hawthorn Resources | 0.063 | 2% | -10% | -32% | -55% | $ 20,100,936.78 |
| HIO | Hawsons Iron Ltd | 0.027 | -7% | -8% | -43% | -27% | $ 27,240,991.47 |
| IRD | Iron Road Ltd | 0.08 | 4% | 0% | 23% | 10% | $ 66,569,966.72 |
| JNO | Juno | 0.031 | -14% | -37% | -73% | -55% | $ 6,368,084.10 |
| LCY | Legacy Iron Ore | 0.013 | 0% | 0% | -24% | -35% | $ 100,276,127.41 |
| MAG | Magmatic Resrce Ltd | 0.056 | -13% | -30% | 19% | -38% | $ 23,771,890.70 |
| MDX | Mindax Limited | 0.044 | -8% | -17% | -29% | -29% | $ 90,146,486.32 |
| MGT | Magnetite Mines | 0.3 | 7% | -23% | 0% | -21% | $ 29,038,232.96 |
| MGU | Magnum Mining & Exp | 0.014 | -3% | -7% | -53% | -36% | $ 11,331,059.64 |
| MGX | Mount Gibson Iron | 0.425 | 5% | 1% | -25% | -2% | $ 510,251,167.86 |
| MIN | Mineral Resources. | 53.66 | -4% | -25% | -24% | -25% | $ 10,765,419,105.70 |
| MIO | Macarthur Minerals | 0.069 | 10% | 11% | -47% | -68% | $ 11,872,263.37 |
| PFE | Panteraminerals | 0.03 | -14% | -43% | -42% | -66% | $ 10,864,245.33 |
| PLG | Pearlgullironlimited | 0.017 | -6% | -26% | -43% | -37% | $ 3,068,126.85 |
| RHI | Red Hill Minerals | 6.6 | 0% | 2% | 32% | 48% | $ 422,048,253.00 |
| RIO | Rio Tinto Limited | 119.63 | -1% | -7% | -12% | 4% | $ 44,794,660,543.38 |
| RLC | Reedy Lagoon Corp. | 0.004 | 33% | 0% | -20% | -31% | $ 2,478,162.93 |
| CTN | Catalina Resources | 0.003 | 0% | 0% | -33% | 0% | $ 3,715,460.68 |
| SRK | Strike Resources | 0.036 | 0% | 0% | -27% | -50% | $ 10,498,750.00 |
| SRN | Surefire Rescs NL | 0.008 | 0% | -11% | -11% | -47% | $ 15,890,462.50 |
| TI1 | Tombador Iron | 0.014 | 0% | 0% | 0% | -26% | $ 30,218,753.22 |
| TLM | Talisman Mining | 0.26 | 2% | -25% | 8% | 53% | $ 49,904,892.49 |
| VMS | Venture Minerals | 0.021 | 0% | -19% | 200% | 50% | $ 45,333,594.04 |
| EQN | Equinoxresources | 0.345 | 0% | -3% | 8% | 229% | $ 39,520,000.96 |
| AMD | Arrow Minerals | 0.0025 | 0% | -38% | -55% | -29% | $ 21,078,730.19 |
| CTM | Centaurus Metals Ltd | 0.455 | 0% | -12% | -14% | -49% | $ 223,281,301.50 |
