Coking coal prices have gone a wee bit crazy in recent weeks, presenting a once in a generation opportunity for ASX-listed companies who looked sickly as the 2021 financial year wrapped up.

According to Fastmarkets MB, supply remains tight in China, which despite mandated cuts to steel production that have caused a slump in iron ore prices, has fuelled a charge in domestic prices to US$487.33 per tonne, up US$6.68 per tonne on Monday.

Australian prices are starting to close the gap as well, with premium hard coking coal cargoes from Dalrymple Bay in Queensland up US$28.98 per tonne to $362.10 per tonne.

Can this last?

There is speculation China is starting to become a little concerned with the price of coking coal, although the problem is substantially one of their own design, with the trade war style decision to lock Australian imports out of China last year distorting the market for the steelmaking fuel.

A decision to release State supplies a couple months ago did little to quell the madness, although finally there was a semblance of a response from the market with coking coal futures in China dropping around 6% yesterday.

Rising coal prices have forced costs from higher steel prices onto customers, one of a number of commodities which has seen the factory gate producer price index climb to its highest level in 13 years at 9.5% last month.

Experts warn the only thing that could bring them back to normality would be something China remains unwilling to do – reopen the coal trade with Australia.

“Since China’s mills use almost 2 million tonnes of coal every day, the premium it pays above coal costs in the rest of the world adds up to about US$2 billion a week,” David Uren from the Australian Strategic Policy Institute wrote yesterday.

“If the embargo were dropped tomorrow, Chinese mills wouldn’t make that entire saving: world prices would rise once Australian coal started flowing to China, but Chinese prices would surely fall.

“China’s ban on Australian coal purchases from around November last year has caused huge distortions in the global coal market, with separate Chinese and rest-of-the-world pricing developing for both metallurgical coal used by steel mills and thermal coal used by power stations.”

 

Stanmore rises on bullish coal outlook

Stanmore Resources (ASX:SMR) is one of a number of Australian coal juniors now trading at clear 12-month highs on the back of storming coal prices, which have soared in Australia despite the Chinese shutout.

The company saw revenues and profits nosedive in the first half of the year, losing $15.5 million. But its second half results are destined to be far rosier.

Open cut operations are set to resume this quarter at the 50%-owned Millennium and Mavis Downs operations in Queensland Stanmore bought from Peabody Energy in July before the start of underground mining in July next year.

A $425 million contract was awarded to PIMS Mining for the mining services at the site last month.

Meanwhile the $47 million Isaac Downs at the Isaac Plains complex was recently approved by the Queensland Government, paving the way for the start of dragline operations in early 2022.

Stanmore is up over 13% over the past week and saw a 7c or 8% gain yesterday to a year-long high of 95c.

Thermal coal companies are seeing strong pricing as well, with Terracom (ASX:TER) telling investors last week it would be receiving an operating margin of $100/t from its Blair Athol mine in Queensland this month.

 

ASX coal stocks

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CODE COMPANY PRICE 1 WEEK RETURN % 1 MONTH RETURN % 6 MONTH RETURN % 1 YEAR RETURN % MARKET CAP
NAE New Age Exploration 0.013 30 18 8 44 $ 18,666,685.83
MCM Mc Mining Ltd 0.125 19 0 0 25 $ 19,302,444.38
SMR Stanmore Resources 0.9 13 22 18 34 $ 237,957,580.08
LNY Laneway Res Ltd 0.005 11 11 0 -38 $ 15,616,263.73
TER Terracom Ltd 0.17 10 10 93 26 $ 128,113,297.10
WHC Whitehaven Coal 3.08 7 29 86 244 $ 3,097,932,696.00
MR1 Montem Resources 0.044 5 2 -71 $ 8,509,756.93
YAL Yancoal Aust Ltd 2.54 5 6 9 28 $ 3,406,733,747.46
BRL Bathurst Res Ltd. 0.72 4 6 67 76 $ 112,828,071.18
NHC New Hope Corporation 2.31 2 11 70 106 $ 1,914,421,288.60
JAL Jameson Resources 0.08 0 -16 -20 -33 $ 24,266,551.20
AKM Aspire Mining Ltd 0.085 0 13 -14 4 $ 43,149,143.73
PDZ Prairie Mining Ltd 0.3 0 3 36 11 $ 68,506,526.70
CKA Cokal Ltd 0.175 0 30 187 250 $ 154,618,581.65
BCB Bowen Coal Limited 0.16 -3 14 221 221 $ 200,009,693.73
CRN Coronado Global Res 1.225 -4 13 18 74 $ 2,078,802,625.20
AHQ Allegiance Coal Ltd 0.61 -5 -13 42 74 $ 205,497,527.50
NCZ New Century Resource 0.16 -6 -14 -9 39 $ 193,588,487.36
PAK Pacific American Hld 0.017 -9 14 -24 -9 $ 5,946,705.74
TIG Tigers Realm Coal 0.016 -11 60 129 106 $ 222,133,940.26
ATU Atrum Coal Ltd 0.039 -11 -11 -83 -85 $ 24,235,628.83

 

 

BHP gets approval to increase iron ore exports

Iron ore exports through the Port Hedland, the world’s largest iron ore berth, fell in August according to figures last week from the Pilbara Ports Authority.

According to the PPA 44.4Mt of iron ore was shipped from Port Hedland in August, leading to a 4 per cent drop in throughput year on year.

Exports through Dampier were up 9 per cent, limiting the year on year drop in throughput to just 1%.

News of the figures came as BHP (ASX:BHP) received approval from WA’s Department of Water and Environmental Regulation to increase its maximum throughput from 290Mtpa to 330Mtpa, a rate that if hit would see BHP compete with Rio Tinto (ASX:RIO) and Brazil’s Vale.

The decision by DWER to grant the licence extension came after years of concerns from locals in Port Hedland about the impact from dust emissions at the Port. DWER said BHP would be held to account if it could not achieve an objective of no net increase in overall dust emissions.

“The Licence Holder is authorised to increase shiploading throughputs from 290Mtpa to 330Mtpa in a staged approach following installation of additional dust and noise controls relevant to each stage of the increase,” DWER said.

“Authorisation to increase throughput is dependent upon the implementation of the specified noise and dust controls.

“Subsequent demonstration that the dust controls have been effective in achieving no net increase in dust emissions at the increased throughput through a Dust Control Validation Report is not connected with authorisations for throughput increases.

“However, in the event that the Licence Holder cannot demonstrate that Premises activities are not achieving the objective of no net increase in overall dust emissions, DWER will look to implement a proportionate and reasonable response.”

 

Iron ore prices drop again on Yunnan restrictions

Chinese steel production cuts have seen iron ore prices slide to 10-month lows, with calls from local authorities in Yunnan Province to reduce industrial emissions by curbing steel and aluminium production the latest example of the trend.

Yunnan is responsible for around 2.3% of crude steel production in China, which in turn accounts for more than half of global output.

Benchmark 62% iron ore fines dropped US$5.87 per tonne to US$123.84 per tonne on Monday according to Fastmarkets MB.

“Iron ore fell following the news of curtailments on heavy industry in Yunnan,” ANZ Research analysts said in a note. “In addition to aluminium smelters, steel mills were also targeted. Mills will be forced to delay some September output to November and December.

“There were also rumours that the central government is asking mills to bring production back to 2020 levels by November instead of December.”

 

Juniors still eager to get into production

 

ASX iron ore stocks

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CODE COMPANY PRICE 1 WEEK RETURN % 1 MONTH RETURN % 6 MONTH RETURN % 1 YEAR RETURN % MARKET CAP
AKO Akora Resources 0.24 26 9 -34 $ 11,777,277.60
RLC Reedy Lagoon Corp. 0.0245 23 11 2 88 $ 12,960,627.98
ADY Admiralty Resources. 0.018 20 6 -5 125 $ 23,464,424.75
MIO Macarthur Minerals 0.58 14 9 7 0 $ 84,659,721.00
HIO Hawsons Iron Ltd 0.091 12 -27 181 101 $ 61,322,553.70
EFE Eastern Iron 0.032 10 78 243 329 $ 23,857,416.45
MDX Mindax Limited 0.045 7 -8 1400 1400 $ 78,663,260.55
VMS Venture Minerals 0.087 5 -13 61 181 $ 120,081,216.06
FMS Flinders Mines Ltd 0.92 5 5 -26 -41 $ 157,029,176.61
RHI Red Hill Iron 3.99 4 -7 898 1714 $ 235,714,125.57
HAV Havilah Resources 0.205 3 5 -7 37 $ 59,724,059.46
ACS Accent Resources NL 0.054 2 4 -43 350 $ 25,165,473.28
CIA Champion Iron Ltd 5.635 1 -8 -7 92 $ 2,775,160,578.72
FEX Fenix Resources Ltd 0.2825 1 -14 20 95 $ 134,580,967.20
PFE Panteraminerals 0.375 0 -3 $ 14,052,500.00
TLM Talisman Mining 0.17 0 -15 87 55 $ 30,793,683.53
SHH Shree Minerals Ltd 0.012 0 9 -25 -14 $ 12,758,842.70
LCY Legacy Iron Ore 0.015 0 0 7 275 $ 96,071,077.76
BHP BHP Group Limited 41.7 -1 -21 -13 14 $ 122,376,427,823.12
GEN Genmin 0.1975 -1 -21 -35 $ 55,046,130.75
MIN Mineral Resources. 52.4 -2 -15 31 93 $ 9,921,850,573.74
DRE Drednought Resources 0.038 -3 -14 138 124 $ 96,103,158.79
JNO Juno 0.18 -3 -3 $ 25,096,730.19
FMG Fortescue Metals Grp 18.035 -3 -19 -15 4 $ 56,683,744,140.38
SRK Strike Resources 0.165 -3 -23 -11 18 $ 39,150,000.00
RIO Rio Tinto Limited 106.89 -3 -11 -8 7 $ 39,356,343,008.28
IRD Iron Road Ltd 0.19 -5 -10 -31 74 $ 166,863,961.74
GRR Grange Resources. 0.5375 -6 -22 1 111 $ 624,962,896.92
BCK Brockman Mining Ltd 0.048 -6 17 37 118 $ 445,403,142.29
MGT Magnetite Mines 0.031 -9 -11 15 138 $ 94,346,366.94
GWR GWR Group Ltd 0.175 -10 -34 -33 -15 $ 54,501,559.74
MGU Magnum Mining & Exp 0.081 -11 -33 -30 80 $ 44,743,042.26
CZR CZR Resources Ltd 0.008 -11 -20 -38 -60 $ 27,890,586.22
SRN Surefire Rescs NL 0.015 -12 0 -42 -12 $ 15,460,345.73
MAG Magmatic Resrce Ltd 0.11 -12 -21 5 -34 $ 26,673,547.78
MGX Mount Gibson Iron 0.4725 -14 -38 -47 -35 $ 558,350,730.66
FEL Fe Limited 0.063 -15 -7 50 152 $ 49,472,303.73
HAW Hawthorn Resources 0.051 -16 13 -27 -50 $ 16,008,749.42
TI1 Tombador Iron 0.042 -19 -35 -47 100 $ 44,282,262.86

 

While the trajectory of the iron ore price has been negative in recent weeks, when prices hit this level back in November last year demand was said to be ‘cantering’.

Indeed, many juniors are still itching to get into production. Macarthur Minerals (ASX:MIO) and Strike Resources (ASX:SRK) both saw positive trading in recent days, with Strike rising more than 10% yesterday.

Macarthur generated strong buying from shareholders late last week after announcing it would retain iron ore tenements in the Pilbara that were set to be transferred to lithium spinout Infinity Mining, which will hold the non-iron ore rights.

Meanwhile, Strike on Monday announced plans to bring its Paulsens East iron ore mine in the Pilbara into production in a two-staged ramp up which will trim its initial capex by more than a third to $5m and speed its path to market.

A final investment decision on starting the 400,000tpa first stage will be made soon, with Strike planning to mine first ore either late this year or early next year and ship its product through the Utah Point facility for junior miners, about 600km away from the site.

Early cashflow will then be used to fund a ramp up to Paulsens East’s full 1.5-2Mtpa run rate.

Cost savings will also be made in the transport arena. Once operations are in full swing shipments will head to Asia via the Port of Ashburton, a 365km reduction in the haulage route for Strike’s Paulsens East ore.

Strike estimates it will have average C1 cash costs (FOB) for its forecast four-year life of mine of approximately US$63–69/t, which would support strong margins at current prices.

At Stockhead, we tell it like it is. While Strike Resources is a Stockhead advertiser, it did not sponsor this article.