coal prices, page-2

This one is tricky. Few drawbacks:

1. They have very aggressive accounting (e.g Watagan consolidation of a 100% owned entity and look at those deferred tax assets)...

2. Large shareholder and limited freefloat - with sizeable interconpany loans at 7% interest. Controlling both equity and debt.

3. High debt levels- thanks to Watagan it ballooned by $1bn - effectively buying Ashton mine when they already owned the Ashton mine....the other watagan assets are on care and maintenance.

4. They keep expanding Moolarben and bought a 10% stake for like $300m - and then revalued the entire asset upwards at the depthsof April'20 market sell off (see aggressive accounting point). Moolarben produces 5500cal coal- so most of their coal gets flushed down the toilet as China is not interested in Aussie coal atm.

However, on the flip side

1. They have HVO and Mt Thorley - Rio's ex best mines
2. 6000cal Coal is at $130, and their costs are low. Plus pricing for 5500kcal is improving
3. they could be pumping $2bn EBITDA this year - 39m tonnes x (AUD 120/tonne sales - 70/tonne cost...

I think most of the positives outweigh the negatives however the free float issues rules it out for me....