wenyou

any updates on coal?

Snowman_sg

Reply to @michaelewanta : You can find them online and on papers. Even other company release.

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Snowman_sg

https://www.argusmedia.com/en/news/1810643...

Also saw a report mention china coal stockpile dropping to 24 days.

Finally some good news.

Snowman_sg

Reply to @ThumbTackInvestor : Yes, TTI pointed out the key points. Awesome as usual.

China small mines are too dangerous, outdated, inefficient and polluting. We know that there are many accidents in these small mines and China govt do not like that. Hence the govt is pushing for their consolidation. Small mine is giving way to big one. The govt had set new rules and regulation to provide license only for mines meeting criteria. This is part of the govt effort on the restructuring of the SOE in the energy sector. I understand there are plans to consolidate them vertically. The impact is to control and stabilise electricity cost. In China, the govt always like stability especially in these core prices which will directly affect their citizen. They hate unrest.

Another prong of the China government policy is aquiring key quality assets oversea which we see in Australia. This is to give them a greater control over seaborne trade. With new powerplant technology, they will also be seeking higher calorific coal than the 4200 ones geo and golden is producing.

The general thread in future is for higher quality coal. This explains why geo is looking for higher calorific mine and golden is seeking metallurgy asset in Australia. But please do not overpay for asset. We know the story of stanmore coal when it is a distressed asset.

I will be dispointed if geo acquired a similar 4200 mine or golden bid a lot higher. Yes, golden spent money on a minority stake in gold mine! And sitting on paper lost.

On the bright side, i do see the key demand for geo and golden in future will be developing countries like indonesia, south east asia.

Hence i see period of greater stability of prices in future. Less sudden spike unless unforseen circumstances like weather or economic growth.

Importantly, mine will need to be efficient, and have economic of scale. Like golden mine with current infrasture improvement, they can ramp up production easily. Earning growth will be driven by production growth.

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ThumbTackInvestor

PSA: (09th Dec 2018)
From my local contacts, cold front hitting both the southeastern and the north cities of China
Sudden plunge in temperatures just started, but forecasted to last only a week (for now)
In the meantime, coal imports still banned in Dec.
Coal stockpiles are likely to drop from the 33 days worth.

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