noirua, is that why some of the coal stocks are firm today, namely CEY, CZA and NHC?
Always possible to have a (power) system collapse with or without a fuel shortage.Hm world shortage would be a scary thing, imagine no light and electricty in Australia! Is this possible?
thx
MS
Has any one got something to share on RIV ? The company shot to $8.40 in 12 months and has the huge reserve .
Regards
Michael,
I notice above you have 17 companies with CSG exposure in your signature...are you keeping track of their resources? (proven / potential?)
WHAT DO YOU ALL THINK?
Any thoughts on how sustainable the recent success of a number of coal stocks might be?
I am thinking in particular of FLX, GCL and CEY. There may well be others.
Can this level of growth be maintained?
Not asking for crystal ball gazing but it seems there are some exceptionally coal-knowledgeable contributors to this thread.
Thanks
Rick
Hi there's a good report out by Patterson's which gives insight of those coal stocks you have mentioned...MS
Hi there's a good report out by Patterson's whichgives insight of those coal stocks you have mentioned
http://www.cockatoocoal.com.au/downloads/newsandresearch/Patersons Article 16 May 2008_8450.pdf
But it does look bullish even from here onwards. Also some new addtions to teh coal list!
MS
Hi Michael
I just had another look at the Paterson article which seems to have been published very recently [May 16].
They rated COK as a buy; FLX and MCC as Holds; and GCL as as a sell.
Your comment "does look bullish" looks spot on at this time.
Have I got this right?
Patersons gave:
The SP of COK as $0.92; PT $1.74. It is now $1.115. Up 25%.
The SP of FLX as $16.66; PT $12.31. It is now $21.69. Up 30%.
The SP of MCC as $17.39; PT $16.70. It is now $19.33. Up 11%.
The SP of GCL as $9.97; PT $7.40. It is now $12.40. Up 24%.
IF I'm right you couldn't complain about any of them.
Question seeking opinions in answer [not recommendations I know]: Where is the best substance / value in TA and FA terms for the longer-term investor? [Like some watchful retirees I know...]
Comments appreciated from anyone.
Thanks
Rick
Hm it depends on whats the best value (for the future) at current prices
Its funny cause Ken Talbot just sold a lot of MCC shares and then bought RIV shares (see annoucement below!)
http://www.asx.com.au/asxpdf/20080529/pdf/319cglymz3zyx9.pdf
....
I got to get me alot more coal plays as I have but a few
Thanks for the info guys
Huntley's Initial Review on NHC 13/06/08
NHC is a coal mining company firmly stamped
with the financially conservative DNA of 61%
shareholder, Washington H. Soul Pattinson (SOL). A
conservative balance sheet makes NHC master of
its own destiny and gives management freedom to
be counter cyclical. Production is primarily export
thermal, with a smaller component of domestic
thermal coal. Most is mined at Acland which has
low costs and a long life. Reserves of 235Mt are
supportive of growth to at least 10Mt a year in
the medium term compared to over 4Mt now.
Jeebropilly and Oakleigh near Ipswich provide
smaller contributions but cash costs are higher,
reflecting limited life and simultaneous land
development. Like sister company Brickworks (BKW),
NHC turned the encroachment of urban areas on
mining into a positive. Land development maximises
returns from sunk capital costs, offers diversification
and potentially a steady earnings stream to counter
cyclical coal earnings. Longer term growth will come
from coking coal via New Saraji.
Our $6.40 a share valuation is made up primarily
of two parts, the thermal coal business – mostly
Acland – and New Saraji. Thermal coal accounts
for $2.25 or 35% while Saraji is $3.25 or 51%. The
remainder is net cash, a 17.7% Arrow Energy (AOE)
shareholding, exploration projects and land, net of
corporate expenses. Long term assumptions are
US$60/t thermal coal, US$100/t coking coal, an
A$/US$ exchange rate of 0.80 and a 10% discount
rate. Deriving half the valuation from an exploration
project is of some concern but New Saraji covers
extensions to BHP’s mine which lowers resource and
coal quality risks.
Our FY08 NPAT forecast of $79.1m assumes NHC
meets production guidance of 4.4Mt of coal,
average US$65/t export thermal coal and an A$/
US$ exchange rate of 0.90. FY09 profit will be
significantly stronger with the record thermal coal
contract price of US$125/t from April 2008, more
than double 2007’s US$55/t. Our $154.7m forecast
assumes 10% production growth, US$103/t export
thermal coal and an A$/US$ exchange rate of
0.93. Unlike most coal companies, NHC’s has many
contracts with prices settling throughout the year.
This smooths prices and means contract changes
take a year for the full impact to flow through. The
recent US$125/t settlement won’t take full effect
until FY10, when we expect earnings to approach
30c a share. Coal prices are forecast to decline to
our US$60/t long term assumption by 2014, with
NHC to see that price in FY16. Medium term land
development earnings and Acland volume growth
broadly offset lower margins beyond FY10 if coal
prices decline to our long term forecast.
Persistent infrastructure tightness will boost
the outlook. Energy is vital and somewhat price
insensitive. The market expects contract thermal
coal to fall next year but it could surprise on the
upside. Spot prices out of Newcastle touched
US$150/t last week versus the US$125/t April 2008
settlement. The high oil price is driving demand for
vastly cheaper coal. Our assumption of stable prices
until April 2010 could be conservative and thermal
coal may well be higher next year.
Domestic coal sells to local power stations. Export
coal is railed to Brisbane on by Queensland Rail
(QR). Capacity is limited by QR rolling stock, train
size and competing Brisbane metro rail services.
Despite this, incremental gains continue to be won.
Rail capacity is expected to top out at 10-14Mt a
year, compared to 5Mt now. Exports are via wholly
the owned Queensland Bulk Handling (QBH) port.
QBH is under long term lease from the Port of
Brisbane. Stage 1 expansion from 5Mt to 7Mt is
set to finish October 2010. A likely Stage 2 will lift
capacity to 10Mt.
QBH serves just two customers, NHC and US major
Peabody. NHC should continue to secure capacity
for mine expansions. Efficient management and low
shiploader utilisation sees QBH demurrage free.
Customers love NHC’s reliable supply. Despite being
NHC mines thermal coal primarily
from Acland, 140km west of
Brisbane, a mid-low cost, long
life mine. Smaller contributions
are from Jeebropilly and
Oakleigh near Ipswich where
land redevelopment offers a
potential new earnings stream
after closure. Group production
is 5Mt a year, 70% export and
30% domestic. Exports are
through a 100% owned facility
in Brisbane. Near term growth
is from Acland exports. New
Saraji in central Queensland’s
Bowen Basin will add coking
coal in the longer term. Coal
seam gas and coal to liquids are
early stage but may be important
longer term. Management is
astute, focused on cashflow,
dividends and sensible long term
investment. The balance sheet
is strong with no debt and over
$100m cash. Single commodity,
infrastructure and mining risk
require consideration.
Huntleys’ Your Money Weekly 5 June 08 19
a small port – 5Mt a year versus 55Mt at Dalrymple
Bay – QBH is low cost. Central Queensland
producers suffer much higher port fees at Dalrymple
Bay. The few dollars NHC saves on each tonne of
coal helps build a moat.
Longer term growth is driven by high grade coking
coal from New Saraji. New Saraji covers the
underground extensions to BHP’s Saraji mine.
Resources of 690Mt are already sufficient to support
a world class coking coal mine. Management’s
ultimate resource target of 1.5Bt looks achievable.
Starting 2011, planned production rises to 10Mt
a year by 2017, making NHC a significant export
coking coal player. The global seaborne coking coal
market is just over 200Mt a year. The timetable to
full production at Saraji looks conservative, but is
prudent given Queensland infrastructure issues.
If the boom roars for the next decade and access
to infrastructure remains problematic, coal prices
will be higher. Acland, with secure access to QBH,
effectively hedges potential delayed Saraji earnings.
Higher coal prices increase New Saraji’s
attractiveness to established miners, particularly
miners with infrastructure access but short mine
life. NHC could sell a portion of New Saraji equity
to cover NHC’s share of capital costs and reduce
financial risk. Neighbour BHP is the logical partner.
Instant underground access from BHP’s opencut
and use of existing coal processing capacity offers
significant capital cost savings. BHP is also the
dominant coking coal exporter.
The exploration portfolio includes Darling Downs,
Bee Creek and New Lenton. Darling Downs covers
4500 square kilometres Around Acland in the Surat
Basin. It is prospective for shallow open thermal
coal deposits for export, domestic power generation
and coal to liquids. Bee Creek in the Northern
Bowen Basin is in close proximity to operating mines
and has coking coal potential. New Lenton covers
depth extensions to Peabody’s Burton mine which
produces coking and thermal coal. Resources of
84Mt at Lenton and 9Mt at Bee Creek are limited
only by drilling. NHC also has an option on coal
seam gas via a 17.7% interest in Arrow Energy.
Market value is over $400m. Shell’s agreement
to invest up to $776m in Arrow for a 30% stake
is another endorsement of coal seam gas by an
overseas energy major.
This needs a wiser head than mine:
Towards the day’s end I lodged a buy order for GCL at $12.36, 4c below the day’s open. High had been $13.03 . At 4pm the price was $12.40. At 4.10pm it still showed $12.40. Then a contract note came through saying I had bought at $11.76 - a new day’s low. Checked again and there was a new close of $11.76 at 2 seconds before 4.11pm and again at 4.20pm. So we had a lower volume day than yesterday, a lower low and a higher high. But how can the SP drop a further 9% after close? Ridiculous. No announcements that I can find...
I don't want to put anyone in the position of being accused of ramping, but if I'm looking at CEY, GCL and MCC, is there a stand out one here, and if so why?
I already have FLX.
There seems to be so much good stuff to choose from in coal stocks so I'd be really appreciative of any opinions here.
With thanks.
Julia
Coal Producers Struggle to Meet Demand
Shortage of Miners,
Investment Makes
Output Boost Tough
By KRIS MAHER
June 24, 2008; Page A4
U.S. coal producers have been largely unable to meet growing demand because of a lengthy permitting process, lack of capital investment and a shortage of skilled miners, which will keep supplies tight and prices high.
The underlying industrywide issues are compounded by severe floods in the Midwest, which have stranded barges full of coal and submerged railcars used to haul coal. It isn't clear what impact those interruptions will have on supplies and prices.
Paul Forward, a coal analyst with Stifel, Nicolaus & Co., expects demand for coal in the U.S. to outstrip supply this year by 15 million tons, in large part because of the increase in exports, which shot up 49% through April compared with last year. Constraints to production also played a role in the growing shortfall, he said.
Limited Supply Response
"Despite the strong margins that coal companies are seeing, the supply response has so far been limited," said Mr. Forward. "I think it's probably a couple years worth of time where these markets stay tight."
Up to 40 million tons of potential and anticipated coal production is being held back because of delays in obtaining environmental permits and new safety regulations, estimates David Khani, director of research at FBR Capital Markets Inc. in Arlington, Va.
While 40 million tons doesn't seem significant given that the U.S. produced 1.15 billion tons of coal last year, even small shifts in supply can have a big impact on price. The reason, analysts say, is that a large percentage of coal supply is tied up in multiyear contracts, so there is little slack to make up for production shortfalls. That could force some utilities to buy coal at current high spot-market prices and pass some of those costs on to consumers.
"People are going to get sticker shock when they open their electricity bills this summer and next summer," said Mr. Khani. Price increases will depend on rules in individual states and on the hedging strategies of utilities.
The Midwest flooding is expected to further tighten stockpiles, by taking several million tons of coal offline, said Vic Svec, a senior vice president at Peabody Energy Corp., in St. Louis, the world's biggest coal producer. Peabody expects to produce between 235 million and 245 million tons of coal this year, compared with 238 million tons produced last year. Roughly 10% of that production is high-quality coking coal in Australia.
The supply constraints are most acute in Central Appalachia, which accounts for 25% of the coal mined in the U.S. but has a greater impact on market conditions because coal from the region generates more heat per ton than coal from other areas like the Powder River Basin in Montana and Wyoming.
The spot price of Central Appalachian coal sold to both utilities and steelmakers has tripled in the past year, with coal going to utilities rising to as much as $140 a ton from $44 a ton, and that destined to steelmakers to $300 a ton, from $100 a ton. Coal production in the region declined 2.3% through early June compared with the same period last year, according to an analysis by Mr. Forward of Stifel, Nicolaus of U.S. Energy Information Administration data.
Hard to Increase Output
"In general it's hard in the short run in our business to dramatically increase production," said Thomas Hoffman, a spokesman for Pittsburgh-based Consol Energy Inc., the nation's fifth-largest coal company by production. "It's not like we have a bunch of idle production and we can just turn a key and out it flows like water through a pipe." Consol, which operates 16 mines in Appalachia and one in Utah, is hoping to boost production 10% to 70 million tons this year.
Industry officials say high operating costs are deterring small operators from opening mines to take advantage of high prices and help relieve supply constraints. Even big companies face higher costs associated with safety regulations and the inability to get enough mine workers. Massey Energy Co. said the biggest challenge to its plan to increase production by up to 9% this year is its ability to find and hire 300 to 400 new miners.
Dan Roling, chief executive of National Coal Corp., of Knoxville, Tenn., which operates mines in the Southeast, said the mining industry was reluctant to buy new machinery and develop new mines when prices were lower. "Until these higher prices [arrived], the industry has not been investing," he said.
As a result, mining companies aren't able to take full advantage of the strong demand
US coal stocks drop 1.1 pct from last wk -Genscape
Tue Jun 24, 2008 5:00pm BST
More Business & Investing News... HOUSTON, June 24 (Reuters) - U.S. power plants have 1.1 percent less coal on hand this week than last as summer heat and floods contribute to stockpile depletion, Genscape said Tuesday.
The cushion over inventories last year also fell 1 percentage point to 2.2 percent as of Monday, the industry data provider said.
Heat in the West South Central region and floods interrupting barge traffic on the upper Mississippi River caused drawdowns, Genscape said.
"The stock draw is likely to accelerate over the next two weeks as high temperatures push into the Midwest and Southeast and eastern production declines due to the July 4 holiday," Genscape said.
The heat and floods come against a background of high natural gas prices, which encourage utilities to burn cheaper coal at a greater rate to control costs.
The cushion in days of burn available this year over last fell to one, down one for the second consecutive week. Utilities had 54 days of average coal burn on hand.
Utilities had 150.2 million short tons of coal stockpiled compared with 151.8 million tons last week and 147 million tons in the same week last year.
Mathematical rounding sometimes affects the results, overstating some changes and understating others, Genscape has said. The firm recently revised its model, which altered totals. (Reporting by Bruce Nichols)
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