BHP Coal Assets

Interesting comment in the Australian today as part of the BHP half year profit announcement:

The mining giant also said on Tuesday it plans to extend the sell-off of its coking coal mines, putting its Daunia and Blackwater mines – part of its BMA group in Queensland – on the block, saying both would struggle to compete for capital going forward.

The obvious is that the coal assets are for sale. The other part of the quote "struggle to compete for capital going forward" is interesting. Not sure if that is due to QLD royalty regime or BHP won't invest in coal. Or more likely a combination of both - in my humble view.

I also had a "WTF" (where's this from") moment reading the half yearly BHP presentation. Slide 10 - Metallurgic coal (BMA) had an EBITDA of USD1.4b for the half year. From slide 20 - full year production guidance is 58-64 million tons. So if 30 mt was produced in the half year BHP's share would be 15mt (I believe BMA is 50:50) or an EBITDA margin of circa US$110 per ton. This margin seemed pretty skinny to me given the coking coal price - although production could have been hit hard by the weather.

In any event. it will be interesting to see if SMR is an interested buyer. Sure they will visit the data room but Peabody, CRN, WHC (who didn't pay out much of a dividend to preserve cash reserves - what could that cash be possibly used for? Acquistion perhaps?) NHC etc will no doubt also have a look.

Interesting to see what happens when the half yearly is released.

Best

BSP

GLTAH, DYOR, NFA, IMHO etc....