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Bulk Buys: Australia’s newest coal miner says emerging economies will power thermal market for the next two decades
Mining
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- South African coal miner Thungela Resources will become the majority owner of Australia’s Ensham coal mine
- Its CEO July Ndlovu says thermal coal will see demand for at least two, maybe three decades
- Iron ore sales lift
There may be clouds over its long term future as many, particularly developed economies begin the arduous shift to something resembling “Net Zero”.
But Australian thermal coal mines continue to find buyers.
While majors like BHP (ASX:BHP), South32 (ASX:S32), Vale, Rio Tinto (ASX:RIO) and more are sellers rather than buyers of the energy fuel, that has not deterred pure play coal stocks from ramping up their investment in the sector.
The latest to step into the Australian coal scene is Thungela Resources, a South African coal miner which demerged from Anglo American in 2021 and is looking to enter the Queensland export market.
Along with minority investors, it has paid $340 million for an 85% stake in the 3.2Mtpa Ensham mine near Emerald from Japanese seller Idemitsu Kosan.
The move is a key one for Thungela. While it is cashed up from high prices, diversifying its production is a canny move given South Africa’s well known political, logistic and supply chain struggles in 2022.
Its CEO July Ndlovu remains confident in the long term future of the energy coal market.
“I have no doubt in my mind that coal is here to stay for a lot longer than most people predict,” he said to Reuters reporters on the sidelines of the Indaba conference in Cape Town on Monday.
“We know that in those (emerging) markets coal use is likely to remain part of the energy mix for the next two decades, maybe three,” Ndlovu said, pointing to markets in Asia and Africa.
The comments came as thermal coal prices reversed the big decline they have suffered this year on Monday, with front month Newcastle futures lifting 6.78% to US$252/t, something which prompted big gains for New South Wales-based exporters like Whitehaven Coal (ASX:WHC), New Hope Corp (ASX:NHC) and Yancoal (ASX:YAL).
Two- to three-year payback
Selling a high energy, low ash thermal coal, Ensham is expected to deliver Thungela a two- to three-year payback period on the current forward curve for Newcastle thermal, with around two-thirds of its 2023 production forward sold “at attractive prices”.
Also with 12.5% stakes in the deal (equating to ~10.6% stakes in the mine) are Swiss investment group Audley Capital and Brisbane based Mayfair Corporations Group Pty Ltd, largely funded through a mezzanine loan from Thungela.
The licence at the mine is up for renewal from 2028, with Idemitsu previously releasing plans to produce up to 4.5Mtpa over nine years from 2028-2037, extending the life of the long running underground operations.
Thungela’s CFO Deon Smith told analysts in Johannesburg on Friday that the renewal should be straightforward, but acknowledged it did have the potential to become a target for climate activists.
A number of coal mine extensions have spent years locked up in legal battles with climate change campaigners, notably Whitehaven’s Vickery extension, where Justice Mordy Bromberg sided with eight children who had brought an appeal against its approval to the Federal Court on the grounds then Federal Environment Minister Sussan Ley should have taken a duty of care to future generations into consideration in their decision making.
That judgment was later knocked back on appeal.
“Fortunately the licences we are speaking of are operating licences to continue to mine, in the existing geology, in the existing underground, using existing infrastructure without any incremental impact environmentally or otherwise,” Smith said.
“So from a mining perspective and from an environmental perspective this is a neutral licence and therefore should not be contentious.
“But as you’ve seen recently in Australia, clearly, we have footwork to be done and we need to ensure that we put our best foot forward to avoid an outcome where we get caught up in debates on climate change and other factors that isn’t currently necessarily a feature of that licence approval, but could become.”
ASX coal stocks
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| CODE | COMPANY | PRICE | 1 WEEK RETURN % | 1 MONTH RETURN % | 6 MONTH RETURN % | 1 YEAR RETURN % | MARKET CAP |
|---|---|---|---|---|---|---|---|
| ACS | Accent Resources NL | 0.025 | 0% | 0% | -46% | -55% | $ 11,650,682.08 |
| ADY | Admiralty Resources. | 0.01 | 67% | 43% | 11% | -33% | $ 13,035,791.53 |
| AKO | Akora Resources | 0.16 | -6% | -3% | -6% | -59% | $ 11,550,433.60 |
| BCK | Brockman Mining Ltd | 0.026 | 8% | 18% | -21% | -57% | $ 241,286,035.41 |
| BHP | BHP Group Limited | 48.01 | -2% | 1% | 24% | 15% | $ 244,172,550,799.20 |
| CIA | Champion Iron Ltd | 7.28 | 1% | -10% | 52% | 5% | $ 3,754,822,094.76 |
| CZR | CZR Resources Ltd | 0.2225 | -5% | 1% | -16% | 92% | $ 52,299,118.80 |
| DRE | Dreadnought Resources Ltd | 0.105 | -5% | 5% | 40% | 156% | $ 308,972,822.00 |
| EFE | Eastern Resources | 0.017 | 0% | -39% | -39% | -70% | $ 19,980,543.53 |
| CUF | Cufe Ltd | 0.0195 | -15% | 34% | 3% | -47% | $ 18,356,134.94 |
| FEX | Fenix Resources Ltd | 0.27 | -2% | 13% | -7% | 10% | $ 157,723,718.40 |
| FMG | Fortescue Metals Grp | 22.05 | -1% | 1% | 22% | 3% | $ 67,614,069,599.28 |
| FMS | Flinders Mines Ltd | 0.47 | -1% | 13% | -6% | -10% | $ 79,358,831.19 |
| GEN | Genmin | 0.2 | -2% | 3% | -18% | -12% | $ 66,304,759.25 |
| GRR | Grange Resources. | 1.05 | 2% | 14% | -8% | 28% | $ 1,186,272,165.45 |
| GWR | GWR Group Ltd | 0.061 | 0% | 5% | -34% | -65% | $ 20,236,649.27 |
| HAV | Havilah Resources | 0.35 | 1% | 13% | 32% | 89% | $ 110,823,723.50 |
| HAW | Hawthorn Resources | 0.096 | -9% | -20% | 16% | 8% | $ 32,161,498.85 |
| HIO | Hawsons Iron Ltd | 0.076 | -18% | -22% | -75% | -67% | $ 60,393,138.53 |
| IRD | Iron Road Ltd | 0.105 | -5% | -13% | -25% | -43% | $ 84,360,817.91 |
| JNO | Juno | 0.1 | -5% | 5% | -26% | -17% | $ 14,244,090.11 |
| LCY | Legacy Iron Ore | 0.017 | 0% | -6% | -13% | -11% | $ 108,916,045.38 |
| MAG | Magmatic Resrce Ltd | 0.11 | -4% | 26% | 57% | 22% | $ 32,097,743.79 |
| MDX | Mindax Limited | 0.059 | 0% | 0% | 0% | 48% | $ 115,533,663.12 |
| MGT | Magnetite Mines | 0.435 | -7% | -25% | -67% | -76% | $ 33,748,003.01 |
| MGU | Magnum Mining & Exp | 0.024 | -8% | 4% | -41% | -68% | $ 17,621,961.73 |
| MGX | Mount Gibson Iron | 0.58 | -7% | 16% | 15% | 33% | $ 716,507,406.47 |
| MIN | Mineral Resources. | 89.09 | -4% | 7% | 55% | 53% | $ 16,814,534,580.00 |
| MIO | Macarthur Minerals | 0.15 | -10% | -6% | -9% | -59% | $ 24,019,755.76 |
| PFE | Panteraminerals | 0.13 | -7% | 18% | 0% | -37% | $ 6,952,651.20 |
| PLG | Pearlgullironlimited | 0.052 | 53% | 117% | 41% | -4% | $ 3,914,706.83 |
| RHI | Red Hill Minerals | 4.7 | 0% | 12% | 39% | 67% | $ 291,694,640.93 |
| RIO | Rio Tinto Limited | 122.9 | -2% | 3% | 26% | 7% | $ 46,034,522,698.14 |
| RLC | Reedy Lagoon Corp. | 0.009 | -10% | -10% | -44% | -73% | $ 5,100,476.41 |
| CTN | Catalina Resources | 0.011 | 10% | 22% | 38% | -39% | $ 12,384,868.92 |
| SRK | Strike Resources | 0.09 | 0% | 2% | -28% | -25% | $ 26,105,000.00 |
| SRN | Surefire Rescs NL | 0.014 | 0% | 17% | -13% | 17% | $ 22,139,088.68 |
| TI1 | Tombador Iron | 0.025 | -17% | 0% | -7% | -46% | $ 53,424,559.33 |
| TLM | Talisman Mining | 0.16 | -6% | 0% | 3% | -6% | $ 30,038,319.52 |
| VMS | Venture Minerals | 0.025 | -7% | 0% | -11% | -39% | $ 44,167,689.80 |
| EQN | Equinoxresources | 0.195 | 18% | 56% | 30% | -7% | $ 8,550,000.19 |
| AMD | Arrow Minerals | 0.005 | -38% | 11% | 25% | 0% | $ 15,202,590.56 |
Australian iron ore sales rebound
Australia’s iron ore sales helped power what is a continued strong trade surplus, which fell from a revised $13.475b in the month of November to $12.237b in December.
Lower met coal sales impacted on the trade account, with hard coking coal values down $781m or 21.8% and semi soft sales dropping $3m or 0.1%.
Thermal coal sales rose $818m or 13.5% in value terms, largely down to a recovery in production in December, with quantities up 26.5%. That lift in output has stalled due to wet weather in early 2023.
At the same time lump and fines iron ore sales saw a strong recovery as our biggest customer China recovered from Covid, with the additional demand boosting the quantity and cost of sales.
Iron ore fines sales lifted 20.9% or $1.392b, over $1b of that attributable to mainland China, with lump sales up $508m or 21.2%.
Overall the ABS says Australia sold $10.982b worth of iron ore in December, the industry’s strongest month since June.
The iron ore sector has been quiet on the market in recent days with the majors gearing for the start of financial results season, starting with Fortescue Metals Group (ASX:FMG) next Wednesday.
At the junior end of town Magnetite Mines (ASX:MGT) announced a non-binding agreement to export high grade magnetite concentrate from its proposed Razorback mine through Sanjeev Gupta’s GFG Alliance’s ports in Whyalla.
Based in the South Middleback Ranges, GFG’s SIMEC Mining is one of the longest running high grade iron ore operations in Australia and the world, with 9Mtpa of iron ore products currently shipped through Whyalla Ports.
MGT is contemplating export scenarios for between 5-10Mt of high grade magnetite concentrates annually.
“Our agreement to work with SIMEC Mining to investigate export services as part of an overall review of export options represents an important step in the development of the Razorback Iron Ore Project,” CEO Tim Dobson said.
“A key feature of the project is its location in South Australia, with nearby rail infrastructure and the opportunity to access existing port capacity offering a low-risk, simplified development pathway.
“MGT and SIMEC Mining both share aspirations to contribute significantly to the urgent decarbonisation of the steel industry, taking advantage of South Australia’s unique attributes with respect to renewable energy, large-scale magnetite resources and supportive stakeholders.”
Theuns Victor, the interim CEO of GFG’s LPMA operations, said the company had invested in an additional harbour crane to double the port’s handling capacity and refurbished its rail tip pocket over the past two years.
“This investment is part of an ongoing focus to increase third party cargo handled through the port and establish the site as a key hub to support our own, and the broader economy’s, growth in the region,” he said.
ASX iron ore stocks
Scroll or swipe to reveal table. Click headings to sort.
| CODE | COMPANY | PRICE | 1 WEEK RETURN % | 1 MONTH RETURN % | 6 MONTH RETURN % | 1 YEAR RETURN % | MARKET CAP |
|---|---|---|---|---|---|---|---|
| NAE | New Age Exploration | 0.007 | -13% | -7% | 0% | -56% | $ 11,487,191.28 |
| CKA | Cokal Ltd | 0.195 | -5% | -3% | 3% | 18% | $ 178,875,306.20 |
| NCZ | New Century Resource | 0.88 | -17% | 2% | -51% | -58% | $ 117,829,576.41 |
| BCB | Bowen Coal Limited | 0.295 | -3% | -9% | 4% | 44% | $ 513,759,916.88 |
| SVG | Savannah Goldfields | 0.2 | 11% | 5% | 0% | 4% | $ 33,992,718.84 |
| GRX | Greenx Metals Ltd | 0.73 | 0% | -12% | 170% | 248% | $ 187,679,143.36 |
| AKM | Aspire Mining Ltd | 0.065 | -3% | -12% | -26% | -22% | $ 32,488,767.04 |
| AVM | Advance Metals Ltd | 0.01 | -17% | 11% | 0% | -41% | $ 5,800,440.69 |
| AHQ | Allegiance Coal Ltd | 0.022 | -44% | -50% | -79% | -94% | $ 18,088,126.72 |
| YAL | Yancoal Aust Ltd | 6.19 | 5% | 0% | 31% | 120% | $ 7,896,227,833.26 |
| NHC | New Hope Corporation | 6.16 | 5% | 2% | 52% | 155% | $ 5,240,680,693.38 |
| TIG | Tigers Realm Coal | 0.016 | 14% | -6% | -6% | -20% | $ 209,067,237.89 |
| SMR | Stanmore Resources | 3.67 | 2% | 16% | 111% | 242% | $ 3,181,877,393.94 |
| WHC | Whitehaven Coal | 8.62 | 3% | -6% | 44% | 205% | $ 7,523,073,282.06 |
| BRL | Bathurst Res Ltd. | 0.89 | 3% | 1% | -12% | 14% | $ 168,396,606.40 |
| CRN | Coronado Global Res | 2.16 | 8% | 7% | 63% | 88% | $ 3,554,081,907.60 |
| JAL | Jameson Resources | 0.09 | -5% | 0% | 6% | 20% | $ 35,235,999.00 |
| TER | Terracom Ltd | 0.85 | -4% | -13% | 6% | 286% | $ 648,782,650.35 |
| ATU | Atrum Coal Ltd | 0.006 | 0% | -14% | 3% | -71% | $ 8,350,195.03 |
| MCM | Mc Mining Ltd | 0.255 | -22% | -6% | 37% | 242% | $ 99,420,397.25 |
| DBI | Dalrymple Bay | 2.52 | 2% | 2% | 16% | 26% | $ 1,239,404,167.50 |
