Citi raising the 6-12 month target price of met coal from US$250 a tonne to US$275 a tonne after the recent sell off speaks for itself. Even the Best Coal Stocks had felt the bearish pressure.
After the temporary slowdown, China’s steel market betrayed weakness leading to price cuts in met coke.
The slowdown is likely to be followed by restocking amid expectations that Indian economic activities would recover after the elections. Indian steel demand is forecast to rise substantially thereafter with ASX Coal Shares back in favor.
Forecasts indicate a significant supply deficit looming for high-CV (HCV) thermal coal. Despite a continually expanding demand, projected to increase by approximately 28% from 2023 to 2040, the supply is expected to decline by approximately 23%.
The Best Coal Stocks ASX are
Whitehaven Coal Limited (ASX: WHC)
Whitehaven Coal Limited had announced the successful completion of its acquisition of 100% ownership of the Daunia and Blackwater metallurgical coal mines, as well as all shares in South Blackwater Coal Pty Ltd, from BHP and Mitsubishi Development, collectively known as the BHP Mitsubishi Alliance (BMA).
In this context, Whitehaven Coal's acquisition of the Daunia and Blackwater coal mines is highly favourable. The acquisition will transform Whitehaven into a metallurgical coal business while still complementing its supply of HCV coal to key markets, primarily across the Asia-Pacific region and Europe. This strategic move positions the company to leverage the supply deficit for both HCV and HCC, driving sales and earnings growth over an extended period.
Whitehaven, considered as one of the best coal companies to invest in, is poised to significantly expand its portfolio, establishing itself as one of the leading metallurgical coal producers in the country. This expansion in production capacity, coupled with a robust sales platform and favourable pricing mechanisms, positions it for substantial earnings growth in the years ahead with Whitehaven Coal Shares getting a significant boost.
The company had earlier released its half-year results for the period ending 31 December 2023. During this period, Whitehaven achieved a ROM production of 10.3 million tonnes, marking a notable 17% increase attributable to solid performance in open-cut operations. However, production at the Narrabri mine was impacted by geological challenges.
Despite challenges, the resilient pricing of high-CV thermal coal supported Whitehaven's realized price of $220 per tonne, resulting in revenues of $1.6 billion for the first half of the year. The company reported an EBITDA of $623 million before $164 million in acquisition-related expenses and a net profit after tax (NPAT) of $372 million before $115 million of acquisition-related expenses.
Whitehaven maintained a robust balance sheet, boasting a net cash position of $1.5 billion as of 31 December 2023, along with a US$1.1 billion financing facility secured for the acquisition.
The company has undergone a remarkable expansion in both revenue generation and earnings capacity over the past few years, as demonstrated in the chart above. Following a recovery from losses in 2021, it has achieved a substantial net income surpassing $2.5 billion in 2023. Concurrently, the company has significantly expanded its asset base while effectively reducing its overall debt levels, resulting in a notable deleveraging of its balance sheet
Yancoal Australia Limited (ASX: YAL)
Yancoal Australia Limited, in the Quarter ending 31 March 2024, continues to generate robust cash inflows. The A$180/tonne price realised was roughly double the cash operating cost that was being targeted this year.
The company maintains a strong financial position, with $1.66 billion in cash at the end of March. Out of this $429 million was for paying the fully franked 2023 Final dividend (A$0.325/share) on 30 April 2024.
Yancoal’s large-scale, low-cost coal production profile is well suited to the current coal market conditions. With no interest bearing loans, a strong net cash position and robust operating margins provides enable the company with the capacity to avail suitable growth opportunities as they arise.
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