Monsters of Rock: Stanmore soars as it takes rich coal profits, materials down but not out on iron ore miners
The big iron ore miners led the materials sector lower, falling 0.78% at 4pm AEDT as BHP, Rio and FMG all dived.
Iron ore prices are in middle of the road territory at around US$94/t with China’s industry breaking for the National Day holidays.
It breaks a three day run of strong gains for the major miners, largely propelled by coal and lithium stocks who remain in the good books today.
Gold miners have paused on their wholesale gains from earlier in the week as prices steadied at ~US$1715/oz, though Northern Star (ASX:NST) was up 2% after its boss Stuart Tonkin told reporters at a Melbourne Mining Club luncheon the company was seeing buyers offer gold hedges for forward delivery at up to $300/oz above spot prices.
Elsewhere there were gains for Rio’s uranium subsidiary Energy Resources of Australia (ASX:ERA) of 7.32% after the world’s second biggest miner succeeded in claiming the head of chairman Peter Mansell and two other independent directors responsible for commissioning a Grant Thornton report which placed a valuation on the untouched Jabiluka uranium mine, an orebody Rio has promised the traditional owners the Mirarr People will never be touched.
In a case of “you can’t fire me, I quit”, Mansell left only a few days after Rio called on him to resign, having previously planned to stay on until a funding solution for the Ranger mine’s $1.6-2.2 billion rehabilitation had been found.
The move strengthens Rio’s hand in its squabbles with minority shareholders who feel the Mirarr may at some point make an unlikely U-Turn and support the development of the long dormant uranium deposit.
Rio, with the support of the Federal Government, has pledged to restore the shuttered NT mine to a similar state as the surround Kakadu National Park.
86% owner Rio has provided ERA with $100m in interim funding to tide the company over until it finds a more permanent solution to its liquidity issues.
Meanwhile Whitehaven Coal (ASX:WHC) hit yet another record high, up more than 4% to $10.90, valuing the thermal coal miner at a tick under $10.5 billion.
Allkem (ASX:AKE) was also one of the top performers after securing a US$200 million project finance facility to sure up the construction of the US$271 million Sal de Vida brine project in Argentina.
Shares in Stanmore Coal (ASX:SMR) stampeded by ~7.5% today as the company announced the completion of its full takeover of the Poitrel and South Walker Creek mines in Queensland.
It brings the mid-tier $2.3 billion capped coal miners transformation from a curiosity, to a major player in the international met coal market, to full butterfly.
Having completed a US$1 billion plus deal in May to pick up BHP’s (ASX:BHP) 80% stake in the JV, Stanmore has now mopped up Japanese trading house Mitsui’s minority share for US$380 million (~$590m).
It will also give Stanmore full control over future decisions to develop new mines within the SMC portfolio such as Wards Well and a total production capacity from Poitrel, South Walker Creek and the Isaac Plains complex of almost 13Mtpa.
The acquisition has also made Stanmore one of the largest producers on the planet of PCI coal. Standing for pulverised coal for injection, the style of coal product had been viewed as having a shorter shelf life by BHP than its preferred premium hard coking coal mines in the BMA (BHP-Mitsubishi Alliance) portfolio.
But PCI prices have enjoyed strong relativities to the coking coal benchmark (around US$270/t currently) due to Russia’s major role in the supply of that product to European steel mills.
Stanmore shares are up 159.09% year to date, reflecting the astonishing profitability of coal miners with prices for both met coal and particularly thermal coal well above historic levels following the fallout of the war in Ukraine.
Incredibly, thermal and met coal collectively have for the first time in four years delivered more moolah to Australia’s export haul than iron ore on a rolling 12 month basis.
These periods don’t tend to last long, but coal prices are expected to have more support than iron ore for some time to come.