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Mining
Coal prices have been extraordinary in 2022.
Australian 6000kcal Newcastle coal hit peaks in excess of US$450/t this year. The dirty, lovely fuel is trading at US$401/t right now.
The historic ride, powered by a surge in demand, Russia’s war in Ukraine and the wet weather that has hammered Australian supply, has seen the sector defy expectations that last year’s run to record levels would be short-lived, as China and India ramped up their domestic production.
In fact, the ~US$270/t prices which represented the peak in 2021 is now looking relatively meek and mild in the monstrous context of 2022.
And these high prices could continue for a long time, if the crystal balling of futures prices can be believed. ICE Newcastle coal futures are still paying US$286.75/t for December 2027. I believe that’s five years from now.
What impact the Albanese Government’s controversial domestic price cap could have on producers in unclear. But overseas markets, increasingly including European buyers, are likely to continue propping up large coal profits for a while to come.
Many market watchers view coal miners, hampered by ESG and approval risk, as underpriced.
OK some of these Aussie thermal name valuations just make no sense. Mkt is just so offsides. Prepare for some smooth brain workings to figure out why. Example de jour: Whitehaven $WHC.AX
👇👇
— Jeremy Raper (@puppyeh1) July 11, 2022
Metallurgical coal is a bit more sensitive. Weak global steel demand saw prices for coking coal fall from a ludicrous US$670/t in the wake of Russia’s invasion of Ukraine to as low as US$200/t before rebounding to US$259/t yesterday.
A massive rise in royalties in Queensland, the main hub of steelmaking coal for export globally has seen a protest from miners, with Glencore ditching plans to develop the Valeria coal mine and BHP (ASX:BHP) refusing to commit capex to invest in the future of its BMA business.
But incentivised to pay dividends rather than invest in growth, coal miners have returned billions in 2022 and made major gains in a year of weakness in international markets.
The energy sector is up almost 36% year to date, but some Aussie coal miners have outpaced even that magic (and ESG resistant) run.
Here are five who have made outsized gains in 2022.
A reflection of its very low base at the start of 2022, obscure South African coal producer MC Mining is up around 250% year to date, though it briefly spiked to almost three times its current 24c share price in September for no apparent reason.
MCM quickly crashed back to Earth after announcing a $40 million at 20c rights issue, offering shareholders 253 shares for every 250 they owned to fund the development of its 2Mtpa Makhado coking coal project in South Africa’s Limpopo Province.
South African prices have lagged Australian coal significantly but have been rising, with MCM’s revenue per tonne lifting 49% from US$70 in 2021 to US$104 in 2022, rising to US$125/t in the first quarter of FY2023 after selling coal in the higher priced and US dollar denominated API4 thermal market.
However, costs have also been a concern for its Uitkomst Colliery, up 41% in FY22 to $85/t. MCM’s financial position was still a bit rough as of September 30, with available cash and facilities at quarter end of $2.2 million.
TerraCom Resources is up almost 370% year to date and dividends have been at the heart of the coal producer’s appeal.
In a nod to the incredible turnaround in the fortunes of coal miners, TerraCom was securing a refinancing pathway just 15 months ago.
By August this year it had completely covered its debt and made a dividend declaration of 10c a share and committed to pay out 60-90% of NPAT every single quarter.
Another followed in November after TER announced $180 million of EBITDA for the September quarter including $121.5m from the flagship Blair Athol mine in Queensland (cash margin of $269 per tonne despite the royalty hike) and $58.8m from its South African mines (margin a more temperate $31 per tonne).
TER chairman Graeme Campbell told shareholders at its AGM last month the company the miner would consider the sale of the South African operation “if favourable terms can reasonably be achieved”.
“The company’s outlook on the coal market remains positive and we look forward to continuing to achieve production targets to meet already agreed sale commitments to our customers,” Campbell said.
Jameson Resources is one of two companies this year to have run like the wind on news of corporate manoeuvres from former coal baron Nathan Tinkler.
Tinkler, who made a fortune on Aston Resources before a debt crisis and bankruptcy brought his personal empire falling down, initially made a play that supercharged the shares of Australian Pacific Coal (ASX:AQC).
Business interests linked to pearler Nick Paspaley and Mat Latimore’s M Resources won out in the race to invest in AQC’s Dartbrook mine.
But Tinkler found another junior in Canadian focused Jameson, owner of the Crown Mountain hard coking coal proposal in Canada.
His businesses Oceltip 1 and Oceltip 2 together hold around 19.92% of JAL after a $10m, 11.55c per share placement in November. The mine in British Columbia would export around 1.95Mtpa over a 15 year life of mine, comprising 86% hard coking coal and 14% PCI.
Canada’s regulatory attitude to new coal mines has toughened in recent years, even for steelmaking coal. But Jameson, which submitted an environmental assessment in April for Crown Mountain, says it won’t commit pre-development capital until it has receive environmental and permitting approvals.
The junior’s market cap has more than doubled to around $47m since the start of the year.
The bellwether of the ASX coal sector, $8.65 billion Whitehaven has seen its shares soar almost 250% in 2022 as prices have driven the company to record profits and shareholder returns.
An initial share buy back that handed almost $588m back to investors will likely be dwarfed by a second buy back for up to 25% of its issued stock that could send $2b into the hand of shareholders.
That comes on top of $449m paid out in dividends for FY22, a number only expected to grow given the profits generated by its Maules Creek, Narrabri and Gunnedah mines in New South Wales.
WHC raked in $1.55 billion in cash in the September quarter at a record average AUD coal price of $581/t, but hinted at the supply challenges the industry will face in FY23 after knocking down guidance from 20-22Mt to 19.0-20.4Mt due to the impact of the La Nina weather phenomenon on its mines.
The sector’s second biggest locally-owned player, New Hope Corp (ASX:NHC) is also a big winner, up almost 150% this year.
The Soul Patts backed stock announced a $300 million buyback after generating earnings of $648m through the first quarter of FY23, and secured the long-fought approval of an extension to its New Acland mine in Queensland, setting up a 2023 restart for the operation.
BHP could not have seen the BMC operation in Queensland, one of the world’s leading suppliers of pulverised coal for injection to steelmakers, change hands at a worse time.
Usually a discount product compared to premium hard coking coal, BHP had been happy to make the billion plus sale to Stanmore on the grounds it thinks the market will be stronger for the higher quality product it produces at its BMA operations.
But Russia was a big supplier of PCI to European steelmakers before its invasion of Ukraine, putting a handy premium on the product. (Thermal coal still holds an unusual and large premium to the normally higher priced steelmaking coal grades as well).
Once a minnow producing less than 2.5Mtpa, Stanmore consolidated its position as player of substance in the global coal export market by paying US$270m (post JV dividend) to buy Japan’s Mitsui out of its 20% stake in BMC (renamed SMC) in September.
Owned primarily by Indonesia’s wealthy Widjaja family, the company which was built off the $1 purchase of want away Vale and Sumitomo’s Isaac Plains mine in 2015, now boasts a capacity of 12.9Mtpa and generated US$726m in earnings in FY22.
There has been a similarly impressive run by Bowen Coal (ASX:BCB), an emerging miner which has made its first shipments from the Bluff and Broadmeadow East mines in Queensland this year led by executive chairman and former Stanmore boss Nick Jorss, up 73.53% YTD.
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 | 0.009 | 13% | 20% | -10% | -10% | $ 12,923,090.19 |
| CKA | Cokal Ltd | 0.2 | 21% | -2% | 43% | 29% | $ 188,289,796.00 |
| NCZ | New Century Resource | 1.04 | -5% | 6% | -53% | -49% | $ 139,069,416.02 |
| BCB | Bowen Coal Limited | 0.275 | 4% | -8% | -26% | 112% | $ 494,331,348.42 |
| SVG | Savannah Goldfields | 0.18 | 6% | -18% | 13% | -6% | $ 32,793,703.22 |
| GRX | Greenx Metals Ltd | 0.575 | 46% | 109% | 229% | 174% | $ 144,563,664.48 |
| AKM | Aspire Mining Ltd | 0.078 | -1% | -7% | -10% | 0% | $ 39,595,684.83 |
| AVM | Advance Metals Ltd | 0.012 | -8% | 9% | 9% | -25% | $ 5,784,528.83 |
| AHQ | Allegiance Coal Ltd | 0.047 | -6% | -15% | -89% | -88% | $ 48,235,004.59 |
| YAL | Yancoal Aust Ltd | 5.64 | 3% | 5% | 3% | 126% | $ 7,064,350,987.95 |
| NHC | New Hope Corporation | 5.77 | 2% | -11% | 48% | 180% | $ 4,983,508,824.00 |
| TIG | Tigers Realm Coal | 0.015 | 25% | 0% | -35% | -25% | $ 196,000,535.52 |
| SMR | Stanmore Resources | 2.6 | 2% | -16% | -1% | 184% | $ 2,307,537,146.88 |
| WHC | Whitehaven Coal | 9.81 | 4% | -2% | 81% | 302% | $ 8,614,073,842.55 |
| BRL | Bathurst Res Ltd. | 0.895 | 17% | 3% | -42% | 39% | $ 172,223,802.00 |
| CRN | Coronado Global Res | 2 | 1% | -2% | 4% | 114% | $ 3,269,084,773.50 |
| JAL | Jameson Resources | 0.125 | 4% | 92% | 67% | 56% | $ 48,938,887.50 |
| TER | Terracom Ltd | 0.85 | 9% | -7% | -1% | 400% | $ 695,580,893.16 |
| ATU | Atrum Coal Ltd | 0.0065 | 0% | 8% | -22% | -74% | $ 9,046,044.62 |
| MCM | Mc Mining Ltd | 0.245 | 9% | 11% | 114% | 288% | $ 95,443,581.36 |
| DBI | Dalrymple Bay | 2.45 | -2% | -1% | 20% | 21% | $ 1,249,319,400.84 |
Iron ore’s raging bull has run out of gas in recent days as poor Chinese real estate data but the kibosh on a run that has seen prices climb from year lows of US$80/t to strong levels of US$110/t in a little over a month.
Singapore prices fell 0.72% to US$108.60/t yesterday, pulling big miners BHP, Rio Tinto (ASX:RIO), Mineral Resources (ASX:MIN) and Fortescue Metals Group (ASX:FMG) down with it.
“Iron ore fell after data showed the property sector remains under duress,” ANZ’s Madeline Dunk said in a note yesterday.
“Falling demand for homes has seen prices decline for 14 consecutive months. Market conditions also remain weak, with property funding and activity very subdued.”
Covid cases are also rising in China as the virus in response to a sudden rollback in restrictions, prompted by protests against Xi Jinping’s austere lockdown policies last month.
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 |
|---|---|---|---|---|---|---|---|
| ACS | Accent Resources NL | 0.025 | 0% | 0% | -58% | -55% | $ 11,650,682.08 |
| ADY | Admiralty Resources. | 0.008 | 14% | 0% | -38% | -43% | $ 10,428,633.22 |
| AKO | Akora Resources | 0.165 | -3% | -18% | -18% | -28% | $ 10,159,511.04 |
| BCK | Brockman Mining Ltd | 0.025 | 9% | 0% | -29% | -50% | $ 241,286,035.41 |
| BHP | BHP Group Limited | 46.08 | -2% | 9% | 0% | 30% | $ 237,029,743,815.24 |
| CIA | Champion Iron Ltd | 6.9 | 0% | 29% | -7% | 49% | $ 3,739,306,300.98 |
| CZR | CZR Resources Ltd | 0.25 | 0% | 18% | -21% | 88% | $ 57,199,184.64 |
| DRE | Dreadnought Resources Ltd | 0.091 | -6% | -9% | 146% | 128% | $ 279,707,751.14 |
| EFE | Eastern Resources | 0.03 | -9% | -27% | 11% | -49% | $ 35,756,998.95 |
| CUF | Cufe Ltd | 0.014 | -7% | -18% | -48% | -56% | $ 15,457,797.84 |
| FEX | Fenix Resources Ltd | 0.25 | 0% | 14% | -19% | 9% | $ 145,928,480.00 |
| FMG | Fortescue Metals Grp | 20.23 | -4% | 14% | -6% | 12% | $ 65,027,739,068.16 |
| FMS | Flinders Mines Ltd | 0.4 | -13% | -20% | -7% | -23% | $ 65,850,945.03 |
| GEN | Genmin | 0.25 | 0% | 2% | 32% | 43% | $ 70,821,962.50 |
| GRR | Grange Resources. | 0.86 | 2% | 15% | -47% | 33% | $ 1,012,671,360.75 |
| GWR | GWR Group Ltd | 0.065 | 7% | 25% | -41% | -38% | $ 21,682,124.21 |
| HAV | Havilah Resources | 0.335 | 12% | 6% | 16% | 91% | $ 106,074,135.35 |
| HAW | Hawthorn Resources | 0.125 | 0% | 45% | 25% | 34% | $ 41,689,451.63 |
| HIO | Hawsons Iron Ltd | 0.1 | -5% | -13% | -80% | -17% | $ 80,355,295.00 |
| IRD | Iron Road Ltd | 0.125 | -4% | 4% | -19% | -36% | $ 99,982,663.00 |
| JNO | Juno | 0.093 | 1% | -3% | -31% | -28% | $ 12,480,536.09 |
| LCY | Legacy Iron Ore | 0.018 | -5% | 0% | -18% | -25% | $ 115,322,871.58 |
| MAG | Magmatic Resrce Ltd | 0.084 | -13% | -24% | 33% | -10% | $ 26,020,966.22 |
| MDX | Mindax Limited | 0.059 | 0% | 0% | 0% | 48% | $ 115,533,663.12 |
| MGTDB | Magnetite Mines | 0.645 | -24% | -24% | -48% | -39% | $ 48,534,778.24 |
| MGU | Magnum Mining & Exp | 0.02 | -9% | -31% | -59% | -76% | $ 13,202,690.91 |
| MGX | Mount Gibson Iron | 0.53 | -1% | 16% | -21% | 31% | $ 649,714,343.16 |
| MIN | Mineral Resources. | 84.98 | -6% | 4% | 50% | 79% | $ 16,757,600,490.00 |
| MIO | Macarthur Minerals | 0.18 | 6% | 24% | -40% | -54% | $ 31,474,162.72 |
| PFE | Panteraminerals | 0.12 | 0% | -27% | 0% | -43% | $ 6,180,134.40 |
| PLG | Pearlgullironlimited | 0.025 | -4% | 4% | -62% | -68% | $ 1,372,557.70 |
| RHI | Red Hill Minerals | 4.01 | 6% | 1% | 23% | 30% | $ 245,738,373.65 |
| RIO | Rio Tinto Limited | 114.1 | -2% | 11% | -2% | 19% | $ 43,191,006,498.90 |
| RLC | Reedy Lagoon Corp. | 0.012 | 9% | 0% | -33% | -61% | $ 6,689,122.94 |
| CTN | Catalina Resources | 0.009 | 13% | 13% | 13% | -10% | $ 9,907,895.14 |
| SRK | Strike Resources | 0.092 | -6% | -8% | -37% | -8% | $ 24,570,000.00 |
| SRN | Surefire Rescs NL | 0.012 | -8% | 0% | -52% | 4% | $ 18,976,361.72 |
| TI1 | Tombador Iron | 0.026 | 8% | 24% | -21% | -10% | $ 57,698,524.07 |
| TLM | Talisman Mining | 0.135 | 0% | 0% | -16% | -13% | $ 25,344,832.10 |
| VMS | Venture Minerals | 0.024 | 0% | -11% | -31% | -38% | $ 42,298,982.21 |
| EQN | Equinoxresources | 0.12 | -8% | 0% | -29% | -40% | $ 5,400,000.12 |
| AMD | Arrow Minerals | 0.004 | -11% | -11% | 33% | -20% | $ 10,168,825.47 |
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