From fast to slow
Wednesday 26 October 2016
Making money out of the completely surprising recovery in coal prices this year is proving more difficult than imagined for some miners, and %. windfall for others.
Statements released by Wesfarmers and Yancoal this week are good illustrations of how the price rises are benefiting shareholders differently.
In the case of Wesfarmers, they have forecast that their Curragh mine will only just break even this financial year, despite steelmaking coal prices increasing 300% and thermal coal prices doubling.
The unusually wet spring and a seven-day shutdown of the CHPP for maintenance work at Curragh has slashed coking coal production in the last three months by 24% and thermal coal production by around 17%.
“The decline in coal production resulted primarily from wet weather conditions, with rainfall during the quarter being 57% higher than the prior quarter and six times higher than the first quarter of the 2016 financial year,” Curragh said today in their operational update.
“Export metallurgical coal sales are expected to be between 8.0 and 8.5 million tonnes, but due to the production disruptions, these sales volumes are projected to be weighted towards the second half of the financial year.
“Approximately 50% of Curragh’s export metallurgical coal sales volumes in the second quarter of the 2017 financial year are expected to represent carryover tonnage which will partially offset recent increases in metallurgical coal prices.
“As a result, the resources business is expected to report a broadly breakeven earnings subject to production, weather events, shipping and currency.”
At the time of writing, share prices in Wesfarmers were down 4% .
In contrast, Chinese owned and controlled Yancoal has seen its shares double on the Australian stock market.
Yancoal has increased production at the Yarrabee Coal Mine near Blackwater by 14% in the last year, although their joint venture at Middlemount has been disrupted by the same wet weather that hit Curragh reducing output by 15%.
However, it’s their refusal to rule out buying Rio Tinto’s thermal coal mines that seems to have got investors interested.
“Yancoal notes recent media speculation in relation to its potential interest in Rio Tinto’s Australian thermal coal assets,” they said in a statement.
“As one of Australia’s largest and leading coal miners, Yancoal continues to review and explore a number of development and acquisition opportunities.”“Recent share improvements continue to be positively influenced by the cent strengthening of global coal prices, as demonstrated by the settlement of the coal industry’s quarterly benchmark for semi-soft coking coal at a new market high.”
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- Rio sells out of coal Wednesday 25 January 2017
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- Start of a bull market Wednesday 07 December 2016
- Another mine on the market Wednesday 16 November 2016
- Curragh doing another headcount Thursday 25 August 2016
- Massive quarterly improvement at Curragh Wednesday 27 July 2016
- Agreement on improving coal price Wednesday 27 July 2016
- Massive hit for Curragh Wednesday 25 May 2016