Valuation, page-227

@FrugalSage
Hi,

I find that the thermal coal price story for the 2 main Australian miners is so convincing, that I try to find what could go wrong with this story.
Interested by your point of view about it, given your knowledge and exposure to this sector.

Here are the main risks I can see at this stage :
- carbon tax. I don't know well the details of what's existing and coming and how it could affect WHC and NHC;
- sudden political decision to stop coal mining (earlier than expected) given the pressure from ecologists;
- deep recession which would have a significant impact on Asian demand,
- switch to other sources of energy if it becomes more economical (ex. what we saw in the US, when some coal-fired plants were converted to natural gas),
- difficulty for their customers (Asian power plants) to fully pass the increase of coal prices to their final customers ? (don't know what happened in the past when there was a comparable surge of coal prices).

Personally, I don't expect coal mining to continue for decades.
Main reason why I am so bullish about the sector : today's share prices (for WHC and NHC) discount a scenario where coal mining would stop in 3 to 5 years at today's level of production and prices. I just find this scenario really pessimistic as I expect prices to remain high (given the supply/demand dynamic) and don't expect the end of coal mining so soon.

Thanks in advance for your feedback.