a good deal of shares traded twice the current value at the beginning of today, so fair value at 3 - 4 cents near term
Highlights
COVID 19 - No negative impact at site operations as of the date of this quarterly report. TIG continues to closely monitor the development of the COVID-19 pandemic and its impact on our employees and operations. No cases registered in Beringovsky.
Safety - The cumulative Total Reportable Injury Frequency Rate (“TRIFR” decreased to 3.39 per million hours from 3.79 in June quarter. No lost time injuries (“LTI” recorded during September quarter.
Coal Production - 266kt of coal was mined and delivered to port during the September quarter, an increase of 65% over the 161kt mined in Q2 2020. Mining guidance for 2020 increased from 550kt to 700-750kt. The increase was driven by lower than budgeted stripping ratio and significant improvements to haulage road conditions. The stripping ratio improved from 7.1:1 in the June quarter to 4.9:1.
Port operations - As a result of TIG’s decision to fully take over port operations, TIG has managed to decrease its loading costs by 50% as compared to the costs incurred with an outside contractor during the 2019 shipping season. During the Q3 2020 TIG has continued its success in loading operations: 498kt was loaded during the September Quarter, a 90kt increase (+22%) over Q3 2019. The average loading rate per weather working day for the season thus far is 7.3kt which represents an increase of 46% over 2019 performance. A record maximum loading of 12.8kt was achieved on 1 August 2020.
CHPP Project – TIG has completed the plant process design and layout. The civil construction design works are ongoing. TIG expects to conclude an equipment supply contract by mid-October.
Sales Guidance – Sales guidance for 2020 has increased from 665kt to 700 – 750kt due to improved mining results, port performance and the haulage road.
Compliance and licencing – The Company is in compliance with all material license obligations.
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During the Q3 2020 TIG has continued to focus on improvement of its loading operations: 498kt was loaded during the September Quarter – a 90kt increase (+22%) compared to Q3 2019. This has been driven by 60% increase in daily loading rates from an average 5kt in Q3 2019 to 8kt in Q3 2020.
TIG has managed to decrease its loading costs by 50% relative to the costs incurred with an outside contractor during the 2019 shipping season. This success was primarily due to appropriate dredging works before start of 2020 shipping season, improving the coal conveyor system, training port personnel, and timely repair work on our barge fleet.
In Q3 2020 TIG has successfully unloaded five general cargo vessels to date with total 3,200 tonnes of cargo - for the first time in TIG’s history
Coal Sales and Marketing
As of 6 October year to date, TIG had signed 14 contracts for the delivery of 524kt of thermal and 156kt of semi-soft coking coal (“SSCC”and has agreed commercial terms on a further cargo of thermal coal for shipping later in October.
Additionally and weather permitting, TIG has one more vessel planned for October-November loading.
Market Outlook
The Asian coking coal market found a bottom during Q3, with a recovery driven by demand in China, India and South East Asia, and the re-start of blast furnaces in Japan by Nippon Steel and JFE Steel. This market is showing signs of returning to balance, and potentially risks tipping into undersupply if summer rainfall in Queensland is heavier than normal which is a possibility given that a “La Nina” weather event in 2021 has been forecasted by the Australian Bureau of Meteorology.
In thermal coal markets, COVID-19 related demand decline in markets outside of China has been somewhat balanced by production cuts, particularly in Indonesia, where 23-25MT of production had been cut YTD. The Chinese market bounced back strongly in August, with power demand lifting 6.8% YOY amid strengthening industrial production and manufacturing activity. Thermal coal inventories at power stations and ports have dropped below last year’s level, reflecting not just the bounce back in thermal power generation but also tight domestic supply as overall thermal coal production has flattened YOY. Newcastle 6,000 NAR and 5,500 NAR coals are assessed last week at $57/t and $45/t respectively, up from $47/t and $36/t three months ago. The 5,500 (high-ash) price was $50/t in October last year, and as high as $57 in February 2020, so the recovery is in the early stages and could be reversed depending on COVID-19 over the northern winter and Chinese domestic coal supply policy.
Demand for TIG SSCC suffered significantly in 2020 due to the temporary suspension of operations at several blast furnaces by our major Japanese customers. SSCC demand has been weak and most of the major Asian steel mills reduced their coal supply contracts, which meant there was no room to purchase “seasonal” spot coals thus effectively limiting TIG marketing of SSCC to spot buyers in China. TIG was successful however in securing a trial cargo to Hyundai Steel, which cargo loaded in early October. This, along with Japanese demand recovery, bodes well for a better year in 2021. In terms of thermal coal, production this year has been mostly of higher ash (28%-30% ash) material with calorific value of around 5,000 kcal/kg NAR. A proportion of 5500kvcal/kg NAR thermal coal has also been sold into Vietnam and China, which have remained relatively strong markets compared to the rest of the world.
TIG Price at posting:
2.2¢ Sentiment: Buy Disclosure: Held
decreased to 3.39 per million hours from 3.79 in June quarter. No lost time injuries (“LTI”
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