ASX Coal Stocks: Top Picks & Analysis
Team Veye | 21-Aug-2023
Coal is classified as a sedimentary rock. It is a fossil fuel because it is formed from dead plant matter. Brown and black coals are mostly used as a source of fuel for power stations. Burning the coal produces heat, which is used to make steam, so the coal is sometimes called thermal or steam coal. Australia has the fourth-largest coal reserves in the world. Since the late 1700s, about 9100 million metric tonnes of black coal and about 2300 million metric tonnes of brown coal have been mined in Australia, and the industry still provides notable employment opportunity, capital investment, and domestic and export income to the national economy. Australia's principal black coal-producing basins are the Bowen Basin (Queensland) and the Sydney Basin (New South Wales). The Gippsland Basin (Victoria) contains a substantial, world-class deposit where seams can be up to 330 m thick. The Otway Basin (Victoria), the Murray Basin (Victoria and South Australia), the North St. Vincents Basin (South Australia), and the Eucla Basin (Western Australia) also contain significant brown coal resources. Minor resources occur in Tasmania's Longford Basin. Currently, brown coal is only mined in Victoria, where the open-cut mines at Loy Yang and Yallourn supply coal to nearby power stations. Coal is one of Australia’s largest commodity exports with annual exports. In 2016, coal exports from Australia mainly went to Japan, India, the European Union, the Republic of Korea, and Taiwan; they were worth about $40 billion. In Australia, nearly 80% of coal is produced from open-cut mines, in contrast to the rest of the world, where open-cut mining only accounts for 40% of coal production. Loy Yang Mine the Loy Yang Mine is a surface mine located in Victoria. It is owned by AGL Energy Limited (ASX: AGL) and produced an estimated 20.83 million tonnes of coal in 2022.
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What are ASX Coal Stocks?
There are Australian companies listed in the Australian stock exchange are called ASX coal shares, where traders buy and sell these ASX coal shares. There are large cap to mid-cap and small level companies proactively participate in the exploration and mining activities in Australia. Some good ASX coal companies that are ASX coal shares from higher market cap to lower market cap (dated as of 16 August 2023) are as follows:
- Whitehaven Coal Limited (ASX: WHC); market cap: $6.18B.
- New Hope Corporation limited (ASX: NHC); market cap: $4.85B.
- Stanmore resources Limited (ASX: SMR); market cap: $2.51B.
- Paladin Energy Limited (ASX: PDN); market cap: $2.25B.
- Energy Resources of Australia Limited (ASX: ERA); market cap: $908.08M.
Why Invest in ASX Coal Shares?
Coal is considered Australia’s largest energy resource. Australia has gained a position as the 5th largest producer, the 2nd largest exporter, and the 3rd largest coal reserve in the whole world.
At December 2020, the total recoverable identified resource of brown coal was estimated at 436,652 metric tonnes, of which the recoverable EDR was 74,039 metric tonnes. Australia has been positioned as the second-largest globally for economically demonstrated brown coal resources, behind Russia and followed by Germany and the USA.
In 2020, coal exploration expenditure was $291.6 million, an increase of 27.2% over 2019 ($229.3 million). Much of the expenditure occurred in Queensland, and coal exploration was approximately 10% of the 2020 total exploration spend (Australian Bureau of Statistics, 2022).
From the above data, it has been clear that Australia holds substantial potential for coal, and demand for coal is expected to go up in the medium to long run, which correlates with the fact that coal shares prices will eventually rise. Investors may add coal shares to diversify their portfolio.
Benefits of Investing in Coal Shares?
Burning the coal produces heat, which is used to make steam, so the coal is sometimes called thermal or steam coal, which is a pivotal source of electricity. The demand for coal will always be in the limelight, but weather conditions and regulatory issues force the price of coal to fall in the lower zone.
Exposure to coal can also provide diversification benefits for the portfolio. For instance, while the prices of most stocks have been fluctuating faster since the onset of the Russia-Ukraine war, the prices of many resource stocks, specifically coal-producing shares, have gone up higher on the back of skyrocketing commodity prices during 2021. Post-2022, the coal prices have taken a heavy correction, and the ASX coal shares have also moved faster on the downside from their all-time high. Investment at a lower and fair price for coal shares will be advantageous in the long run when the price starts to shoot up again in the future.
Top 5 Coal Mining Companies in Australia?
The coal price, after reaching near US$400 per tonne on November 7, 2022, has taken a toll and is currently trading at US$115.20 (As of August 16, 2023). ASX shares performed significantly well in 2020 and 2021; during the last year, ASX coal shares outpaced the broader market. There are top coals mining companies in Australia are as follows:
Whitehaven Coal Limited (ASX: WHC)
Whitehaven Coal Limited (ASX: WHC), which has a market cap of $6.18 billion and a current market price of $7.39 (as of August 16, 2023), is an Australian producer of premium-quality coal focused on the development and operation of coal mines in New South Wales and Queensland.
Whitehaven Coal Limited has recently completed its refinancing. The company sourced contingent credit support facilities covering guarantees for environmental bonding, rehabilitation, port, rail, and other financial guarantees. The previously held $1 billion undrawn financing facility has not been renewed. Whitehaven will retain cash on its balance sheet for operating the business, including for working capital purposes.
New Hope Corporation Limited (ASX: NHC)
New Hope Corporation Limited (ASX: NHC), which has a market capitalization of $4.85 billion and a current market price of $5.74 (as of August 16, 2023), is an Australian public company that is actively engaged in the exploration, development, production, and processing of coal, oil, and gas, as well as marketing and logistics. NHC also holds exploration tenements in Queensland. NHC has business interests and operations spanning coal mining, exploration, port operations, oil, agriculture, innovative technologies, and investment.
The fully franked FY2023 interim and special dividends totaling 40 cents per share were announced during the April quarter. The Company is focused on providing stable, growing returns to shareholders through dividends and ensuring the significant value of the company’s franking account is utilized. The company expects that dividend payments and share buy-backs will continue to dominate capital management activities.
Stanmore resources Limited (ASX: SMR)
Stanmore Resources Limited (ASX: SMR) has a market capitalization of $2.51 billion and a current market price of $2.79 (as of August 16, 2023). It owns and operates the Isaac plains complex in Queensland's prime Bowen basin region, which includes the Isaac plains mine and processing facilities.
Stanmore ended the half year with US$421 million in cash in hand and total debt of US$351 million, resulting in a 30 June 2023 net cash position of US$70 million. This was despite a large income tax payment in June 2023, ongoing capital expenditures, and strategic acquisitions of additional long-term rail and port capacity. The net cash position is a remarkable result for the company considering the US$795 million in total debt drawdowns during 2022 and the subsequent acquisition of the remaining 20% interest in SMC funded by internal cash flows.
Terracom Limited (ASX: TER)
Terracom Limited (ASX: TER) has a market capitalization of $360.43 million and a current market price of $0.45 (as of August 16, 2023). It is a resource company that is involved in the development and operation of coal mines in Queensland, Australia, and South Africa.
Total coal sales for the June quarter reported down on a combined basis, due to lower than expected coal sales achieved within the South African operations. High, unseasonal, widespread rainfall and ongoing logistics constraints continue to affect export coal sales, with train and truck availability consistently impacted.
Bowen Coking Coal Limited (ASX: BCB)
Bowen Coking Coal Ltd. (ASX: BCB) has a market capitalization of $234.96 million and a current market price of $0.11 (as of August 16, 2023). It is a Queensland-based coking coal exploration company with advanced exploration assets.
Bowen Coking Coal Ltd. achieved its monthly goal of shipping four vessels in July 2023, exporting approximately 179 kilotons of coal from its PCI near Blackwater and Broad Meadow East Pit Coking, part of the company’s Burton mine complex near Moranbah.
External coal supply chain issues have eased, and the Company is confident recent momentum will continue in the near term with an increase in coal tones for the quarter and a higher percentage of metallurgical coal over time.
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Frequently Asked Questions (FAQ)
What are the best coal stocks to buy?
Australian coal mining companies that are basically coal stocks provide buying opportunities when there is massive demand for coal, and hence coal prices also rise. Some of the best billion- and million-dollar companies by market cap are as follows:
Stanmore Resources Limited (ASX: SMR) has a market capitalization of $2.51 billion and a current market price of $2.79 (as of August 16, 2023). Bowen Coking Coal Ltd. (ASX: BCB) has a market capitalization of $234.96 million and a current market price of $0.11 (as of August 16, 2023). New Hope Corporation Limited (ASX: NHC), which has a market capitalization of $4.85 billion and a current market price of $5.74 (as of August 16, 2023).
Who are the top coal miners in Australia?
The top coal miners are: Whitehaven Coal Limited (ASX: WHC), with its subsidiaries, is involved in the development, production, and operation of coal properties in New South Wales. New Hope Corporation Limited (ASX: NHC) engages in the exploration, development, production, and processing of coal in Australia.
Should I invest in coal shares in Australia?
Australia has the fourth-largest coal reserves in the world. Investors might consider the significant resource-based competitive advantages that are present with the ASX coal company’s production and development. Someone may invest in ASX coal shares when a substantial correction takes place and coal companies are available at a fair price.
Which is the richest coal field?
Peak downs coal mine in the Bowen basin of central Queensland, followed by the Mt Arthur coal mine in the Hunter valley region of New South Wales, is the biggest Australian coal mine by reserve.
What country has most coal?
Australia has the fourth-largest coal reserves in the world. In FY2022, the total income reported by the coal mining industry in Australia amounted to around $105 billion. This reflected a notable increase from FY2021, which marked the highest value recorded during the reported period.
What are the types of coal?
There are mainly two categories, as follows:
Thermal coal is basically used in electricity generation. 75–80% of Australian thermal coal is exported.
Metallurgical coal is used for steelmaking. Pricing for metallurgical coal is premium to thermal coal and strongly correlated with steel production.
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