Roundtable Discussion; The Future of Mineral Sands. Watch the video here.
“…No doubt followed by sell off in afternoon or Friday!”
I’ll stick my neck out. I’m not so sure if we’ll see the typical afternoon sell-off today, or similar on Friday. Yesterday was noticeably different, potentially marking a change - rather than the typical afternoon sell-off, the SP fell at the very start of the day before slowly climbing (and then giving up some of that recovery but nothing like the previous afternoon slides, including a few days ago when from about mid-day it was almost a straight line down).
No, it’s fallen hard & fast, so much so that it’s undervalued and attractive in my opinion.
There are a variety of possibilities for yesterday’s fall, ranging from the straightforward (sells exceeding buys) to the possibility of market maker shenanigans.
I’ve long been suspicious about days when a sharp fall is followed by an sharp rise, without any relevant news. Sharp falls both trigger stop losses and also cause some people to panic and sell.
Worse still, the same people as those who sold, ruled by emotion, may panic on the rise and buy back in - they end up with fewer shares than had they left it alone, for the same sum invested.
If there’s no apparent reason for a fall, I hold. It normally corrects itself (but not always). I viewed yesterday as a buying opportunity. Sadly, I missed the boat today.
Of course it’s easy for me to comment after the event (though the day hasn’t ended, nor has this volatility).
Continued…
The coal division of Anglo American, the world’s fifth-largest producer outside China of the metallurgical coal used in steelmaking, swung from losses of $34mn in the 12 months ending on June 30 2021 to earnings of $2.5bn a year later.
The biggest increase in coal profits was at BHP, where they surged 3,200 per cent, from $288mn in the 12 months ending on June 30 2021 to $9.5bn a year later. BHP is the world’s largest producer of metallurgical coal outside China.
At Glencore, coal earnings rose to $13.2bn, compared with $1.2bn during the same period a year earlier.
“The seaborne producers are the big winners,” said Myles Allsop, analyst at UBS. Companies that mine coal that is exported and traded internationally have had bigger gains than the state-owned coal miners that sell to their domestic market.
“The Ukraine war has triggered the extreme tightness in the coal market,” said Allsop, adding that sanctions had blocked Russian coal from the European market.
Before the boom in coal prices, many of the biggest miners outside of China and India were busy paring back their coal operations.
This was the rationale behind the decisions of BHP and Anglo American to dispose of their respective stakes in the Cerrejón coal mine in Columbia, which exports high-quality thermal coal to Europe.
In January, they sold their combined 66 per cent stake to Glencore for $101mn in cash and other considerations, giving the Switzerland-based commodities group, which already owned 33 per cent, full ownership of the asset.
Cerrejón generated $2bn in earnings before interest, tax, depreciation and amortisation during the first half of 2022, many times the purchase price. “It probably looks like the best deal anyone has ever seen,” said Ben Davis, mining analyst at Liberum Capital.
The end. You’re welcome.
(This is in 2 parts due to the character limit).
Heading: Big coal miners’ profits triple as demand surges
Sub-heading: Companies defy long-term decline with $97bn earnings bonanza in 2022
The world’s largest coal mining companies tripled their profits in 2022 to reach a total of more than $97bn, defying expectations for an industry that was thought to be in terminal decline.
As global demand for the fuel rose to record levels, total earnings from coal operations at the world’s 20 largest coal miners reached $97.7bn during the most recent 12-month period for which financial information is available, compared with $28.2bn during the same period a year earlier, according to Financial Times research and data from S&P Capital IQ.
Many countries that once pledged to quit coal have turned back to it as a reliable source of heat and power as energy security concerns became a top priority following Russia’s invasion of Ukraine.
The biggest money makers were Glencore, whose coal earnings were $13.2bn in the 12 months ending on June 30; China Shenhua, which made $12.2bn during that time; and BHP, which brought in $9.5bn, mainly from production of metallurgical coal.
Just a year after the UN COP26 climate summit pledged to “phase down” coal, demand for the fossil fuel has instead grown, boosted by high gas prices and the European energy crisis. Global coal demand rose 1.2 per cent to reach a record high in 2022, according to the International Energy Agency.
In 2022, the benchmark price for high-quality thermal coal in Europe was $295 on average — double the levels of the previous year, and nearly four times higher than the average price between 2010 and 2020, according to Argus Media.
As a result, coal mining companies have experienced a huge and unexpected improvement in their fortunes.
Continued…
Here we go again - we are up 40p. We’ve caught the ski lift up and may catch another one. From then on we’ll descend the slopes till we arrive back at the bottom of the nursery slopes, on +7p if we are lucky and -7p if we are not.
@pop31 “…And also, many investors love charts, even though they don't always give the right picture. And Thungela's chart potentially has just formed a head-and-shoulders trend, which is often interpreted as being a sign of a downward turn…”
The chart has been artificially warped by the massive dividend. The (right-hand side of the) head formed artificially on 22/9/22, all because TGA went ex-dividend on that day with a massive £3.00 dividend i.e. 16% of the then SP. A 16% fall in any share due to a dividend is going to artificially create the right-hand side of a head.
Put it another way, if there were no dividend, you would not have a classic head & shoulders.
We then had COP27 which tends to pull TGA down further.
I take your point but there’s other factors in play here.
(Continued…)
Environmental groups condemned the increased imports and said the UK had an opportunity to move away from pollutants. ‘’Instead of replacing Russian fossil fuels with more polluting coal, banging its head against the same wall and hoping for the headaches to go away, the government should invest in home insulation and renewables,” said Louis Wilson of the NGO Global Witness.
Analysts said some of the imports will become storage ahead of the arrival of cold winter weather.
Lou Roberts, research manager for the Coal Transition Team at E3G, said that the UK has bolstered its coal stocks in case of a “worst case scenario” of excess demand during a cold winter which would have usually been met by gas. “This coal will only be burnt if there isn’t enough wind or solar or gas supplies are running low [...] There might be one or two days during the winter that could require turning these coal power stations on but that might not happen. So we might end up with this coal sitting there and not being burned.”
Since the UK’s “dash for gas” in the 1990s, coal’s share of electricity generation has halved and there are now only three coal fired plants running. Tony Lodge, political and energy analyst at the Centre for Policy Studies said the UK’s reliance on gas made it vulnerable to shocks.
He said: “Having to ask 50 year old coal fired power stations to stay on for another two to three years in the hope the energy crisis will go away is a sign of a failed national energy policy.”
Lodge said that the government should have a more balanced energy mix that would make the UK less vulnerable to shocks.
The disruption in energy markets from the war in Ukraine has delayed the UK’s plan to end the use of coal power by 2024. In May, Kwasi Kwarteng, then business secretary asked National Grid executives to work with the owners of Britain’s three remaining coal fire power plants to ensure energy security for the Winter. Last month, Uniper SE, which owns the Ratcliffe-1 coal-fired power plant in Nottinghamshire announced it was going to keep the plant open to secure winter energy, despite plans to shutter it this year.
Headline:
UK doubles coal imports to head off winter energy crisis
Imports almost double as Ukraine war turns natural gas into a no-go zone.
Rising gas prices resulting from the war in Ukraine have forced the UK to nearly double its coal imports in the fight to keep the lights on through the Winter.
The increasing use of coal-generated power in the UK comes after years of the country shifting to cleaner electricity from gas-fired power plants and renewables, but is deemed vital as Russian president Vladimir Putin crimps gas supplies to Europe.
Figures from Kpler, a commodity analytics firm, show that last month more than 560,000 tonnes of coal came into British ports, compared to the 291,089 tonnes that arrived in October 2021, a 93 per cent increase.
In the first 10 months of this year, the UK imported more than 5.5 million tonnes of coal, already exceeding the 4.2 million tonnes throughout the whole of 2021.
Victor Katona, senior analyst at Kpler said increased demand for coal is because of the rising price of wholesale gas. “Absent the option of burning fuel oil - the most cost-efficient power generation option right now - coal - is very much the best option out there, albeit the most polluting one, too.
“With gas prices like these, relying on natural gas for power generation is a no-go zone for anyone who can switch between fuels.”
Prices for gas increased rapidly since the invasion of Ukraine.
The doubling of the October coal imports suggest the UK is accelerating purchases as winter draws nearer. Official data for the Department for Business, Energy and Industrial Strategy for the April to June quarter showed the annual increase was only 44 per cent.
The extra coal that has been flowing to the UK is thermal coal which is burned to create steam used for electricity generation as opposed to coking coal, used for making iron or steel.
Most of the coal was arriving at the ports in Belfast and Immingham.
In its scramble for coal, the UK is importing from countries it has never traded with before. Mozambique had never sent coal to Britain before but was the second largest exporter of coal to the UK in September behind the United States.
(In two parts due to the character limit).
Continued…
Fun fact, the share chart for the last week has been like watching England play, only in reverse. If you see what I mean.
I’m a sucker for it regardless - I’m cheering Englamd on. I know it won’t last but I will enjoy it while there’s hope. It’s sobering that the “Thirty years of hurt” line in “Three Lions” is almost sixty now.
@Richt999
Thank you for that. It’s an interesting article.
https://www.dailymail.co.uk/news/article-11447127/amp/Explosion-hits-Russian-gas-pipeline-amid-suspicions-sabotage-linked-Putins-war-Ukraine.html
This should cause a rise in gas prices and therefore coal too.
Curiously, U.K. broadsheets seem not to be covering this story: It’s in the Mail and the Express and that’s about it.
… share price up 6.7% on Friday yet only 10 comments were posted. Actually, only 3 commments if you exclude all those about a different share (Peabody), the latter being very unusual for this board.
There’s a general lack of hysteria and far less ramping. It’s peaceful and more mature. Thanks everyone for that.
Happy Burn-An-Effigy Day. May your rockets stay dry and your Catherine wheels actually spin.
Me: “…who invariably have no idea what they are doing, hate anyone saying anything negative, and react to the latter with personal insults.”
You: “Share dealing aside , you're still a smug pri.ck.”
@sammy.18, it’s a triple in just eight words! Thank you. Are you passionate about proving me right?
@antlev, you’re welcome.
I laughed at the replies to my comment.
There is such an equivalent website. It’s LSE but on the not-so-popular shares. The popular ones attract the get rich quick crowd who invariably have no idea what they are doing, hate anyone saying anything negative, and react to the latter with personal insults (all the things I said in my previous comment). It is a breath of fresh air following such a discussion.
So, it’s the share, not the site.
“I can see your annoying everyone on this board too antlev.
Looks like people have worked you out doesn't it!!”
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Discussion boards are self-declarations. When people write something like “your annoying everyone”, they reveal a little bit about themselves, in this case twice over (in the spelling and in that they only want to hear good news). When they end a question with an exclamation mark rather than a question mark, they do the same.
Discussions for popular shares are also littered with people who can’t learn the basic rules of the English language yet somehow think they are financial gurus. One of my favourite recent comments was by poorinvestor who not only can’t even spell his own name but also said “I’m an expert in maths”. I’m going to become an expert in rocket science in 30 seconds. Here we go: I’m an expert in rocket science.
Such discussions are also littered with people whose response to anyone writing something negative about the share is to personally insult the person who said that.
This drives people away, the very people who provide balance. A number of people have stopped sharing their (negative) analysis. Since then, their predictions have come true.
It’s an Uncrossing Trade.
“In an era of heightened environmental awareness, South African coal miner Thungela Resources (TGA) has defied the odds to become a somewhat controversial success story, with its shares rocketing well over 10 times…”
It’s that “heightened environmental awareness” that has caused the 10-fold increase in the share price. I am so grateful to green campaigners.
It’s not “controversial” at all - it’s wonderful.
I was wondering how much people who bought in that early on did invest, on top of their “free” shares. People invest very different amounts.
I was concerned too when they fell from a little under £5 to £3 (it actually fell to about £2.70) in October 2021. But the fundamentals hadn’t changed so I held.
Poor investor makes it up as he goes along.
Notice how he says 3p or 30p when the SP closed at 2.765p on Friday and is down in the USA today. He ignores all that and gives two possibilities - up either a lot or a ludicrous amount (8.5% or nearly 1000%)! It’s what he does.
…rs