Tigers Realm Coal’s shares soar 370pc on production increase, China news
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Tigers Realm Coal’s (ASX:TIG) shares bolted in Thursday ASX trade, jumping 370 per cent to 4.7c at one point, as the company announced it was building a coal handling plant for its coking coal mine in Russia’s Far East.
The processing plant brings Tigers Realm Coal closer to its goal of increasing production at its Amaam North project for thermal and coking coal in Russia’s Chukotka autonomous region.
With a processing capacity of 150,000 tonnes per hour, the coal plant costing £5.5m ($10m), will become operational in early 2021.
The coal processing facility will allow the company to increase its production of coking coal which attracts higher market prices.
Currently, 70 per cent of Tigers Realm’s production is thermal coal and 30 per cent coking coal.
The processing plant will turn this ratio around to 80 per cent coking coal, 20 per cent thermal coal.
“TIG plans to market the plant’s output of semi-hard coking coal in the north Asian coking coal markets where we are seeing positive price support,” said the company.
The company started to sell small volumes of its Russian coking coal to Japanese steel companies two years ago, and its year-to-date coal production is 560,000 tonnes per year.
Tigers Realm is aiming to produce 700,000 to 750,000 tonnes of coal this year and ships through Beringovsky Port, said a company presentation.
Investors in Tigers Realm Coal may also have responded to reports that China has decided to slow down the pace of coal imports from Australia.
Chinese coal buyers may be looking for alternative supplies of coking coal such as from Russia, Canada or Mongolia, said the reports.
“Coking coal exports from Canada and Russia also stand to benefit relatively. However, given the relatively minor shares of Russia and Canada in China’s coking coal imports, we think any benefit may be limited,” said Commonwealth Bank of Australia commodity analysts in a report.
Tigers Realm Coal is able to ship coal production through its Beringovsky port and coal terminal 35km to the east of the Amaam project.
S&P Global Platts reported that managers at some power companies and steel producers in China were told by officials to reduce their orders for Australian coking coal.
China operates a quota system for coal imports, set at 270 million tonnes this year, and to avoid the quota being filled too early the country tends to seek to smooth out import flows.
“History suggests that Australia’s coal export volumes are unlikely to be that adversely impacted by China’s specific and unofficial measures to target Australian coal,” said the CommBank analysts’ report.
Despite talk of import controls in 2019, China lifted its imports of Australian coking coal by 7.8 per cent on year, and for thermal coal imports were up 0.4 per cent on year.
International thermal coal prices have been depressed this year and have induced some large coal producers to make production cuts.