I was doing some thinking on what the possible impact of the washed coal sales on TIG profitability and and stock price. I'm just going to post some analysis on my thoughts here and I'd love to hear what people think or any critques.
I've broken it into two main parts:
- How much can TIG produce, load and ship in 2021?
- What is the overall financial impact of sales?
How much can TIG produce, load and ship in 2021?Obviously, this will depend when the wash plant becomes fully operational (Q2 report said it would be commissioned and tested in August but we haven't heard further). Once it is fully operational its meant to operate at 150 per hour, 20 hours per day almost all year round with a 61% yeild from the washed (the weight of the washed coal that comes out should be 61% of the weight of the unwashed coal that goes in).
With those figures you get an ouput of apprximately 1,830 tonnes per day or about 54,900 per month (assuming 30 day months).Based on the Q2 report I think the absolute best case scenario is its fully operation as of 1 September 2021.
Last year TIG loaded coal up until the first few days of December. So that would give a best case scenario for sales of coal washed between September and November. That would suggest a production capacity of 164,700 tonnes of washed coal. They probably can't roll to the end of November and then load it though so let's cut off a week and round it to 150,000 tonnes best case scenario.
Conversly, they might not be able to get stock delivered to port and loaded or find buyers quick enoguh to ship it. This is particularly an issue if the wash plant isn't fully operational for another month or two.
So I'll say we could look at 3 scenarios:
Pessimistic: No washed coal sales
Mid-range: 50,000 tonnes washed coal sales
Optimistic: 150,000 tonnes washed coal sales
What is the overall financial impact of sales?
I'll approach this by assuming a few figures and collating some info from the TOG JORC report and articles about current market conditions.
| Item | Dollar amount |
|---|
| 1 | USD HCC price | $412.35 USD |
|---|
| 2 | FOB adjustment | $390 USD |
|---|
| 3 | SHCC discount | Minus 15% |
|---|
| 4 | USD SHCC price | $331.5 USD |
|---|
| 5 | USD SHCC cost | $68 USD |
|---|
| 6 | AUD/USD | $0.75 |
|---|
| 7 | AUD SHCC price | $442 AUD |
|---|
| 8 | AUD SHCC cost | $90.65 AUD |
|---|
| 9 | AUD SHCC margin | $351.33 AUD |
|---|
I got the HCC figure from this article:
https://www.argusmedia.com/en/news/2251466-mine-accident-sends-china-met-coal-prices-above-600t (local Chinese HCC seems to be selling for $600 USD but non-Australian improters still allowed only CFR $412.35 USD)
Pessimistic: No sales means no additional profit and no impact
Mid-range: 50,000 tonnes could create a gross profit contribution of $17,566,500 AUD
Optimistic: 150,000 tonnes ould create a gross profit contribution of $52,699,500 AUD
Conclusion If thermal coal sales can generate enough of a profit to cover operating expenses, TIG could have a 2021 net profit greater than its 2020 revenue (approx $47 million). That's if everything runs perfectly though.
The possibilities look very exciting for holders but there is a lot of risk and uncertainty. What does everyone else think?
There are a lot of unknowns, this is not financial advice, do your own research.
