Bulk Buys: Coal miners continue to seek diversity

Thermal coal stocks continue to look for diversity
Yancoal dumped its dividend yesterday in a blow for investors as the cashed-up producer scours for met coal mines
Asian fund APAC Resources punts $1.3 million, upping its Fenix stake to 10.75%

Coal stocks which happily paid off debt and machine gunned cash into investors’ pockets after the Russian invasion of Ukraine caused a price explosion are now stashing it away for a rainy day, building war chests to buy new assets.

The latest example comes from Yancoal Australia (ASX:YAL), which saw its shares tank by 14.5% after dumping what had become a reliable dividend lining over 30c a share in shareholders’ pockets in consecutive reporting seasons.

Those climbed as high as 70c in early 2023 after the greatest thermal coal price boom ever seen.

But with $1.5bn in the bank and no debt, the majority Chinese controlled ASX and Hong Kong listed coal producer is wanting for more.

Despite softness in the Chinese steel market, which culminated in the world’s largest steel producer Baowu last week telling investors to be prepared for a ‘long harsh winter’, YAL wants to dive deeper into met coal, following in the footsteps of formerly thermal coal dominant Whitehaven Coal (ASX:WHC).

Iron ore prices have crumbled in recent days, falling almost 10% last week and trading yesterday arvo at US$94.25/t.

Front month Australian premium hard coking coal futures have also suffered, down from US$260/t in early June to US$199/t yesterday.

But they remain far above Newcastle grade thermal coal, which is fetching US151.25/t.

Yancoal’s move comes after WHC controversially suspended buybacks ahead of the $6.4bn pick up of BHP’s Blackwater and Daunia mines last year, an indicator prices are no longer strong enough for investors to have their cake and eat it too when it comes to dividends and growth.

Balancing the portfolio

With more revenue on offer at met coal mines, thermal coal producers are still keen to use their cash piles to diversify out of energy and into steel markets.

“We do look at other thermal assets, but at the end of the day, we’ve got, in my opinion, the three best thermal coal mines in Australia,” Yancoal boss David Moult said.

“We’re already the owner of those mines, and they are our three tier-1 operations that account for around 80% of everything we do.

“What we would like to do is balance that portfolio. We’ve had quite a few questions about thermal and met coal markets this morning, and I think one of the things we’d like to do is to put some balance in there and increase our exposure to met coal.

“So we are looking for the same sort of opportunities that we developed when we acquired the Coal and Allied (Rio Tinto) mines back in 2017 and we’re looking for that similar sort of opportunity in met coal to try to balance our portfolio.”

The obvious call is the Anglo American met coal portfolio. Following the end of BHP’s (ASX:BHP) takeover assault on the London-listed miner, the diversified producer wants to sell its Queensland coking coal mines, including the temporarily suspended Grosvenor, in order to fund capex on its copper and iron ore businesses.

Yancoal delivered $3.14bn in revenue in the first half of calendar 2024, down from $3.98bn a year earlier with realised coal prices 37% lower at $176/t. Profit after tax dropped 57% to $420m.

That came despite saleable production lifting on a 100% basis by 16% to 21.6Mt (17Mt attributable), against cash costs of $101/t excluding government royalties.

Yancoal closed the half with $1.55bn in the bank, leaving guidance unchanged at 35-39Mt for 2024 at costs of $89-97/t, with $650-800m planned in capex.

While its thermal coal sales price fell 39% to $156/t in the half, met coal selling prices fell just 18% to $319/t in Aussie dollar terms, though lower prices saw royalty payments fall 40% to $15/t, while costs were also 7% lower than a year earlier.

For the 16.9Mt in attributable sales, just 2Mt were to steel markets.

Yancoal owns or operates eight coal mines across New South Wales, Queensland and WA with a total saleable coal capacity of 55Mtpa.

Close to half of that came from the flagship Moolarben mine in the first half, with NSW delivering $1.021bn in operating EBITDA. Its Queensland operations, which are far smaller in scale and delivered just $256m in revenue, delivered a negative $43m contribution to earnings.

The current Queensland operations include the smaller Yarrabee and Middlemount mines, which produce lower value PCI coking coal as well as hard coking coal.

ASX coal stocks

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CODE	COMPANY	PRICE	WEEK %	MONTH %	6 MONTH %	YEAR %	YTD %	MARKET CAP
NAE	New Age Exploration	0.004	0%	0%	0%	-33%	-33%	$ 7,175,595.64
CKA	Cokal Ltd	0.086	-1%	-1%	-14%	-22%	-28%	$ 94,947,510.24
BCB	Bowen Coal Limited	0.017	-29%	-67%	-71%	-85%	-83%	$ 54,134,403.34
SVG	Savannah Goldfields	0.031	11%	-14%	-11%	-62%	-38%	$ 6,746,037.98
GRX	Greenx Metals Ltd	0.78	-3%	-13%	-27%	-22%	-15%	$ 222,203,320.44
AKM	Aspire Mining Ltd	0.27	0%	-27%	46%	193%	157%	$ 137,061,985.95
AVM	Advance Metals Ltd	0.02	-17%	-20%	-32%	-82%	-46%	$ 2,708,248.86
YAL	Yancoal Aust Ltd	7.25	4%	0%	27%	42%	46%	$ 9,441,141,974.55
NHC	New Hope Corporation	5.08	6%	3%	-2%	-10%	-2%	$ 4,235,130,674.64
TIG	Tigers Realm Coal	0.003	-14%	0%	-40%	-50%	-45%	$ 52,266,809.47
SMR	Stanmore Resources	3.5	4%	-12%	-3%	23%	-13%	$ 3,091,773,304.62
WHC	Whitehaven Coal	7.83	7%	-9%	4%	8%	5%	$ 6,483,656,076.00
BRL	Bathurst Res Ltd.	0.69	-5%	-18%	-22%	-30%	-28%	$ 133,951,846.00
CRN	Coronado Global Res	1.36	6%	-4%	-11%	-16%	-23%	$ 2,296,741,610.10
JAL	Jameson Resources	0.061	3%	2%	110%	20%	36%	$ 29,832,911.44
TER	Terracom Ltd	0.21	17%	-5%	-18%	-52%	-50%	$ 160,193,247.00
ATU	Atrum Coal Ltd	0.004526	0%	0%	0%	0%	0%	$ 12,000,798.96
MCM	Mc Mining Ltd	0.14	0%	0%	-7%	-15%	-7%	$ 57,961,868.86
DBI	Dalrymple Bay	3.09	2%	2%	11%	13%	15%	$ 1,526,945,934.36
AQC	Auspaccoal Ltd	0.12	20%	26%	32%	-12%	20%	$ 64,056,110.88

APAC ups stake in Fenix

Iron ore miners have been sold off heavily in the past week on falling 62% Fe prices.

Andrew Forrest last week gave his view that prices would remain in the vicinity of a US$80/t floor thanks to higher cost suppliers exiting the market, with the Fortescue (ASX:FMG) boss remaining bullish on demand for the Pilbara producer’s product.

There were green shoots for some iron ore producers yesterday, with the market in a better mood.

Fenix Resources (ASX:FEX) was a notable outperformer after Asian fund APAC Resources, a well known backer of Aussie mid-tier miners, upped its stake in the small-scale Geraldton focused producer from 8.64% to 10.75%.

The Hong Kong based fund spent $1.321m acquiring shares on market between November 22 last year and August 16 this year, and controls 72.5m shares via its investment in Mount Gibson Iron (ASX:MGX), which exercised options granted by Fenix in a deal to trade the Koolan Island mine owner’s Mid West iron ore assets to the junior.

Meanwhile a second junior ran higher in under a week on Monday, with Australian Critical Minerals (ASX:ACM) climbing on rock chip results from iron ore samples taken at a site in the Pilbara bounded by tenements owned by Fortescue (ASX:FMG) and Gina Rinehart’s Roy Hill.

It came after Leeuwin Metals (ASX:LM1), predominantly known as a Canadian lithium explorer, announced strong results in rock chips from its West Pilbara project, where it thinks a channel iron deposit could reside similar in nature to Rio Tinto’s nearby Robe River JV.

ASX iron ore stocks

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CODE	COMPANY	PRICE	WEEK %	MONTH %	6 MONTH %	YEAR %	YTD %	MARKET CAP
ACS	Accent Resources NL	0.006	0%	-14%	-40%	-25%	-25%	$ 2,838,763.70
ADY	Admiralty Resources.	0.009	-10%	-18%	29%	29%	29%	$ 14,665,265.46
AKO	Akora Resources	0.1	-20%	-29%	-25%	-37%	-33%	$ 12,048,737.60
BCK	Brockman Mining Ltd	0.019	-10%	0%	-30%	-37%	-32%	$ 176,324,410.49
BHP	BHP Group Limited	40.25	-1%	-4%	-13%	-8%	-20%	$ 201,491,919,359.41
CIA	Champion Iron Ltd	5.79	-3%	-6%	-30%	5%	-31%	$ 2,927,270,655.65
CZR	CZR Resources Ltd	0.25	-6%	-9%	-9%	56%	19%	$ 59,110,132.25
DRE	Dreadnought Resources Ltd	0.019	27%	-17%	-5%	-59%	-37%	$ 67,194,000.00
EFE	Eastern Resources	0.0045	13%	-10%	-44%	-59%	-44%	$ 5,588,759.07
CUF	Cufe Ltd	0.009	13%	-25%	-47%	-44%	-36%	$ 13,366,748.65
FEX	Fenix Resources Ltd	0.3	-19%	-23%	18%	2%	5%	$ 208,979,196.80
FMG	Fortescue Ltd	17.26	-5%	-20%	-39%	-15%	-41%	$ 52,373,193,255.18
RHK	Red Hawk Mining Ltd	0.8	2%	-8%	25%	23%	35%	$ 159,849,183.20
GEN	Genmin	0.092	-16%	-39%	-43%	-41%	-43%	$ 63,041,108.11
GRR	Grange Resources.	0.285	-10%	-20%	-35%	-44%	-39%	$ 347,201,609.40
HAV	Havilah Resources	0.19	6%	-16%	27%	-30%	-3%	$ 60,161,449.90
HAW	Hawthorn Resources	0.061	2%	-14%	-27%	-47%	-34%	$ 20,435,952.39
HIO	Hawsons Iron Ltd	0.021	-9%	-19%	-43%	-43%	-55%	$ 24,396,032.83
IRD	Iron Road Ltd	0.075	-3%	-1%	29%	-19%	12%	$ 64,905,717.55
JNO	Juno	0.031	0%	0%	-60%	-61%	-72%	$ 6,004,193.58
LCY	Legacy Iron Ore	0.014	-13%	-18%	-13%	-22%	-18%	$ 107,989,675.67
MAG	Magmatic Resrce Ltd	0.059	-5%	-14%	97%	-11%	20%	$ 25,023,042.84
MDX	Mindax Limited	0.052	6%	4%	30%	0%	-13%	$ 106,536,756.56
MGT	Magnetite Mines	0.265	10%	-12%	0%	-33%	-14%	$ 26,605,632.04
MGU	Magnum Mining & Exp	0.012	-14%	-14%	-45%	-68%	-57%	$ 9,712,336.84
MGX	Mount Gibson Iron	0.33	-3%	-13%	-36%	-18%	-40%	$ 395,965,548.23
MIN	Mineral Resources.	43.74	-12%	-22%	-27%	-31%	-38%	$ 8,686,122,296.80
MIO	Macarthur Minerals	0.066	10%	3%	-54%	-64%	-47%	$ 13,577,254.68
PFE	Panteraminerals	0.025	-7%	-31%	-59%	-70%	-52%	$ 10,612,747.91
PLG	Pearlgullironlimited	0.014	8%	-18%	-48%	-44%	-53%	$ 2,863,585.06
RHI	Red Hill Minerals	3.93	-23%	-31%	-6%	13%	-3%	$ 273,183,682.50
RIO	Rio Tinto Limited	110.47	-4%	-3%	-16%	5%	-19%	$ 40,766,964,621.48
RLC	Reedy Lagoon Corp.	0.003	0%	0%	-25%	-57%	-40%	$ 1,858,622.20
CTN	Catalina Resources	0.0025	-17%	-17%	-38%	-38%	-44%	$ 3,096,217.23
SRK	Strike Resources	0.027	-10%	-23%	-23%	-47%	-45%	$ 8,512,500.00
SRN	Surefire Rescs NL	0.006	-8%	-14%	-45%	-63%	-29%	$ 11,917,846.88
TI1	Tombador Iron	0.014	0%	0%	0%	-33%	0%	$ 30,218,753.22
TLM	Talisman Mining	0.2	-17%	-26%	-5%	38%	-15%	$ 36,722,468.06
EQN	Equinoxresources	0.245	-8%	-22%	2%	44%	-18%	$ 32,201,000.78
AMD	Arrow Minerals	0.0025	-17%	-29%	-50%	0%	-50%	$ 26,348,412.74
CTM	Centaurus Metals Ltd	0.345	-5%	1%	19%	-56%	-36%	$ 156,307,936.05
LM1	Leeuwin Metals Ltd	0.08	10%	-2%	-12%	-77%	-43%	$ 3,748,133.68
ACM	Aus Critical Mineral	0.077	17%	-1%	-23%	-57%	-41%	$ 3,073,383.75