Cockatoo coal, page-18

Single commodity companies are always a risk and single mine companies even more so. Coal prices like most commodities go through big swings in prices through the business cycle. Most costs are fairly well fixed and depend on things like coal quality, stripping ratios, distance from the port and transport availability. Management has only a small but still important influence. Mostly when they claim amazing savings its only because of short term expediences like cutting overburden removal or reclamation work, or a special short term deal with the unions, which only come back with a big bite to the bum later. One way to analyse the mines is the three tier classification. Tier 1 mines make money all the way through the business cycle - example most of BHP's QLD mines. Tier 2 lose money at the bottom of the cycle - examples most of Peabody's and Glencore's mines. Tier 3 only make money at the top of the cycle - example Anglo Am's Aquila. Baralaba is definitely a tier 2 mine - even after the expansion. Its brilliant and high value at the top of the cycle and a dog at the bottom. The problem is - where are we on the cycle? Is it headed further upward, or are we in a dead cat bounce as the whole coal industry collapses under the weight of the climate change fanbois?