Fortunes could be changing for New Age’s metallurgical coal project

New Age could be at a turning point for its Lochinvar project in the UK due to import bans on Russian coal increasing global demand and prices for metallurgical coal.

Russia had previously supplied some 30% of Europe and the UK’s metallurgical coal needs and the sanctions have resulted in a scramble to secure supplies of the steel-making product.

This shortage has led New Age Exploration (ASX:NAE) to express cautious optimism that the regulatory environment for metallurgical coal projects – as opposed to thermal coal used for power generation and heating – will improve.

As a result of this improved sentiment, the company has commissioned Palaris Australia to carry out a further update to its Lochinvar Scoping Study.

Palaris is intimately familiar with the project given that it had developed the original Scoping Study in 2014 and a subsequent update in 2017.

“In recent months, NAE has received expressions of interest in the Lochinvar project from a range of potential investors, as the economic outlook for metallurgical coal continues to improve,” executive director Joshua Wellisch said.

“NAE remains confident that new technologies that may replace metallurgical coal in the steel sector may not come online for many decades.”

Lochinvar project

The Lochinvar metallurgical coal located on the border of England and Scotland consists of three adjacent exploration and conditional underground mining licences.

It is ideally suited to be a low-cost supplier of metallurgical coal due to its proximity to an existing railway that links directly to UK steel mills and nearby ports, lower labour rates compared to Australia, a favourable fiscal regime, and growing demand.

Unlike power generation where there are numerous alternatives to thermal coal, steel-making is still dependent on metallurgical coal as there are no commercially viable substitutes in the blast furnace process.

Metallurgical coal is used in blast furnaces as a source of the energy, a reducing agent to convert iron ore to liquid iron and CO2, and to provide the structure and permeability within the furnace to prevent it from becoming clogged.

It also provides the carbon atoms used to produce steel.

The company expects prices of metallurgical coal, which recently spiked above US$500 per tonne which is well above KPMG’s long-term forecast of US$150/t, to remain elevated for a number of years due to strong demand, ongoing trade balances even after an end to Russia’s invasion of Ukraine, and a lack of investment in new mine capacity over recent years.

This article was developed in collaboration with New Age Exploration, a Stockhead advertiser at the time of publishing.

This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.