Coking coal guide - Why it’s hot and which small caps look well...

Coking coal guide - Why it’s hot and which small caps look well positioned Resources

Steele Guru

Coal News - Published on Mon, 21 May 2018

Image Source: zeebiz.com
Stock Head reported that thermal coal may be on the nose among investors, but coking coal is still going strong and it’s encouraging some interesting ASX activity. Coking coal prices have been on the up since mid-2016, buoyed by strong demand in Asia for steel due largely to China’s focus on infrastructure and housing. About 60 % of global supply comes from Australia, according to the Department of Industry, Innovation and Science.

The bulk is produced by Australia’s majors Rio Tinto, Yancoal, Whitehaven Coal but there are at least seven smaller companies racing to fast-forward Australian mines or exploration blocks into production.

Bounty Mining, is due to list in June with an AUD 18 million IPO (and a project with a complicated tail of legal issues).

Of the ASX’s 19 coking coal companies who aren’t a big coal producer, 11 are looking overseas for their competitive edge and few are doing any producing yet.

TerraCom and Aspire Mining are in Mongolia, a country with some of the world’s richest coking coal reserves but which must largely sell to its neighbour China, limiting the country’s ability to raise prices.

The others are spread around the world and are entirely explorers, from Cokal’s Indonesian licences to Tiger’s Realm Coal’s Russian adventure.

Realm Resources is currently subject to a takeover offer. It has been in suspension for much of the last two years but did trade for a month in June and July last year.

The reason for the rush of explorers is, partly, the fact that prices have surged since the middle of 2016.

The outlook for coking coal is much better than for its relative, thermal coal, due to the expected continuation of strong demand for steel.

Global crude steel production was 426.6 million tonnes in the first three months of 2018, up 4.1 % compared to the same period in 2017, according to the World Steel Association.

Spot prices for Australian coal were around USD 220 a tonne earlier this year on strong Asian demand, bad weather in the United States, and supply problems in eastern Australia keeping the market tight.

While they’re expected to soften as more supply comes on stream and indeed have dropped to around USD 180 to USD 190 they aren’t expected to drop past USD 140 a tonne before bouncing again later this year, so speculated the March Resources and Energy Quarterly.

Pac Partners energy analyst Lawrence Grech wrote in late April that coal prices were still up around two year highs two years and “when combined with the rude health of North Asian steel mill margins – appear to be supportable in an environment of still firm global growth.”

Mr Grech said that “We believe this price outlook has significant upside potential as China’s coking coal mines face ongoing regulatory and resource challenges and there remain Australian infrastructure and mine production inefficiencies due to recent years under-investment.”

Mr Grech said that “Indeed, significant re-investment in Australian mines as strip ratios increase as well as greenfield Canadian mine development costs support higher longer-term incentive prices than most market commentators are willing to concede at present.”

Here’s list of table of ASX-listed coking coal stocks, courtesy of leading ASX data provider MakCorp

	Column 1	Column 2	Column 3	Column 4	Column 5	Column 6	Column 7
0	ASX Code	Company	Price YoY	Price	Market Cap	Location	Status
1	AHQ	ALLEGIANCE COAL	127.00%	0.05	23.2M	Queensland, Canada	Exploration; Feasibility study
2	AJC	ACACIA COAL	-60.00%	0.002	3.2M	Queensland	Sold
3	AKM	ASPIRE MINING	12.00%	0.019	50.6M	Mongolia	Feasibility Study - Advanced
4	BCB	BOWEN COKING COAL	-50.00%	0.015	7.5M	Queensland	Exploration
5	CKA	COKAL	41.00%	0.038	28.5M	Indonesia	Exploration
6	JAL	JAMESON RESOURCES	24.00%	0.13	33.4M	Canada	Exploration
7	LNY	LANEWAY RESOURCES	0.00%	0.003	10.0M	NSW	Feasibility Study - Advanced
8	MCM	MC MINING	-55.00%	0.51	71.8M	South Africa	Feasibility Study - Advanced
9	MEY	MARENICA ENERGY	-12.00%	0.11	6.3M	North America	Exploration
10	MRV	MORETON RESOURCES	-18.00%	0.009	24.9M	Queensland	Exploration
11	NAE	NEW AGE EXPLORATION	-17.00%	0.01	4.1M	UK	Scoping Study -Advanced
12	PAK	PACIFIC AMERICAN	25.00%	0.066	10.9M	Canada	Scoping Study -Advanced
13	PDZ	PRAIRIE MINING	16.00%	0.545	93.0M	Poland	Bankable Feasibility Study - Advanced
14	RRP	REALM RESOURCES	Suspended	0.085	-	Queensland	Production
15	SMR	STANMORE COAL	83.00%	0.66	167.4M	Queensland	Exploration
16	TER	TERRACOM	11.00%	0.345	118.8M	Queensland, Mongolia	Exploration; Production
17	TIG	TIGERS REALM	-16.00%	0.047	86.OM	Russia	Feasibility Study -Advanced, Producing
18	WLC	WOLLONGONG COAL	-33.00%	0.006	56.2M	NSW	Production - Care & Maintenance -Advanced
19

Source : Stock Head