Coal news and updates

Chinese Miner Plans IPO of Australian Coal Assets

Coal prices are burning brighter than for several months, and that’s encouraging Chinese miner U&D Mining Ltd. to seek a listing for Australian coal assets acquired in July.
 
The company, which is owned by China’s state-backed Henan Energy and Chemical Group, hopes to raise as much as 125 million Australian dollars (US$113 million) in an initial public offering of U&D Coal Ltd. later this month.
 
Once a darling of the stock market, coal miners in Australia have fallen out of favor with investors after prices of the fuel slumped amid a broader pullback in global resources demand. Tepid fuel demand in Europe prompted big thermal coal suppliers like Russia to turn to Asia to soak up excess supply. At the same time, cheap natural gas in the U.S. as a result of the shale gas boom led many power plants there to switch away from thermal coal, contributing to global oversupply.
 
Still, China’s coal imports have continued to increase—up 19% in the January-October period at 216 million tons–as power plants restocked ahead of winter when temperatures in northern cities like Harbin tumble well below freezing.
 
That’s helped push up prices. In China, the world’s biggest coal producer by volume, thermal coal prices at the eastern port of Qinhuangdao price recently moved above 600 yuan (US$99) a ton for the first time since mid-June. It’s a similar story at the Port of Newcastle where thermal coal prices now trade at $82.80 a ton, up from a low of $76.10 in August.
 
Coking coal used to make steel have yet to show such a large price response. A ton of coking coal currently fetches $136, only slightly up from a low of $131 in June. That’s despite prices of iron ore, the other key ingredient in steelmaking, approaching a near-four-month high driven by some Asian mills replenishing their stockpiles.
 
U&D Mining bought several coal developments in the Bowen Basin of Queensland state through a A$71 million takeover of Endocoal Ltd. earlier this year. Endocoal’s shares were delisted from the Australian Securities ExchangeASX.AU +0.36% in July.
 
Its projects are Rockwood, Meteor Downs South, Inderi and Broughton, which have a combined resource of 540 million tons of mostly coking coal. It hopes to start production at Meteor Downs South at a rate of 1.5 million tons of coal annually by the end of next year, with Broughton following in the second quarter of 2016.
 
According to a prospectus lodged with Australia’s securities regulator, U&D Coal will mainly use funds to develop the Meteor Downs South project, and assess other coal deposits. The IPO is being led by Melbourne-based AFS Capital Securities.
 
“While the company believes it has highly prospective tenements, it will seek to acquire further tenements through vacant tenure, acquisition or partnership, as and when the opportunity arises,” U&D Coal said.
 
U&D Coal’s owner, Henan Energy and Chemical Group, was recently formed by the merger of Henan Coal Chemical Industry Group and Yima Coal Industry Group.
 
According to the prospectus, Henan Energy and Chemical Group has an annual production capacity of more than 100 million tons of coal, mostly in central China’s Henan province. It also produces molybdenum and bauxite, and owns cement plants, power stations and aluminum smelters.
 

Source: The Wall Street Journal