$10 thread, page-354

Even I'm surprised at how quickly sovereign risk has escalated in Australia with Labor/Greens in control.

At this stage the two major changes that have been, or are about to be rammed through parliament, that impact coal producers, would appear to have little direct impact on nhc. That is, a massive hike to royalties in QLD, and price caps on domestic coal sales.

That said, a very clear signal from Labor/Green governments has now been given, that if you are a coal (and I would include gas in this to a slightly lesser extent) producer, you take all the risk and bear any losses, however if markets become favourable we will quickly change the laws so that we take a much, much larger percentage of your profits.

I did suspect something along these lines would be legislated, but not to such a huge extent, and not this quickly. NHC so far, partly through forward thinking and partly through luck (or rather, less bad luck) has not been heavily impacted (excluding the ridiculous delays in approval of NA3). Sovereign risk has escalated dramatically and it is an increasing risk that we will be impacted in the future by government intervention.

Being rational though, we are still currently very undervalued based on current profits and at this stage are largely unaffected by government interventions.

Also taking a longer term lense future supply is very likely to be even more restricted compared to demand levels with the sovereign risk that has presented itself in Australia and the US. High prices will likely be present, on average, for a long time to come. Although it is increasingly likely that the additional profits this would generate will be offset by government taxes (in one form or another). Overall profit levels are still likely to be quite high over the medium to long term all of this considered, however government intervention has become a very significant risk.

I did take some off the table from $5 all the way to the top, recently bought a little of that back again, and considering topping up a little more (similar views on whc).