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I agree that OPG is exceptional value and should offer a very high yield over the long run at the current share price. But estimating EBITDA for this FY looks impossible to me - too many unknowns. We know very little about pricing since March, although the Tangedco website suggests tariffs should be at least R6.70 per kWh; we know nothing about the mix of domestic and imported coal (the former is much cheaper); and we know nothing about how much of OPG’s generated power is being supplied to its captive industrial customers and how much to the national grid via Tangedco. I agree that PLF should be around 70-75%. It would help if Cenkos’ research notes were better quality, and if OPG had more regular trading updates. On the plus side, the lack of transparency on trading presents a buying opportunity for those of us that follow Indian thermal coal prices. Coalmint is a good source.
During the first half of the year they moved operations to a new, more productive coal seam. It appears this took some time to complete and resulted in substantial one-off capex, which I assume included removal of overburden to access the new coal seam. Hence the drain on cash. Cashflow in H2 won’t have any of these issues, and moreover the higher quality coal will have yielded higher prices. Edward is right that a lot of their profits come from processing both their own, and bought-in, coal; with buoyant demand I’m hoping for exceptional coal sales volumes in H2.
With no broker coverage there are no market profit forecasts. So I think the company is likely to make upside profit warnings once it is certain to make large year-on-year profit increases. As has been alluded to, it did this in early June this year. I would hope they do this again in early December. The Directors seem to have a philosophy of no Investor Relations, preferring to devote scarce managerial resources (just the CEO and CFO) to running the business. This won’t change. So not a trader’s share, but an excellent long-term investment. I’m hoping at some point they announce either a mining acquisition or a new project (renewables possibly). Something to utilize their growing cash reserves.
It’s true ICI-4 futures prices haven’t fallen much, but that is a paper market and won’t necessarily reflect transactions prices in the spot market. All the available evidence is that European demand has fallen sharply after an extended period of stock building, resulting in much weaker prices recently for Australian, South African etc thermal coal. It’s hard to believe that doesn’t also apply to Indonesia. My impression is that OPG has excellent coal traders, who consistently beat the market in finding cheap supplies - and selling surplus coal at a profit. Since PLF has fallen so much this FY, I’m hoping they’ll have made strong profits from selling surplus coal inventory.
I have recently acquired 1.8 mn shares, partly as a hedge against my coal mining stocks.
The annual results statement included some very helpful info on prices and PLF in the five months to end August. From that, I estimate generation (exc deemed units) of 417 mn kWh in the half year (PLF 28.6%) and revenue of £40 mn. Adjusted EBITDA should be about £10-11 mn hopefully, just below the figure a year earlier. EBITDA margin (per cent of revenue) should be similar to the 27% recorded in FY2022.
I don’t think £10 is an unrealistic target. The Sisonke CHPP has annual processing capacity of 2 mn tonnes. This year mining conditions are supposed to be much easier as they move to a new open cast resource. If they could produce say 1.5mn tonnes pa, buy in 500k tonnes pa for processing, and export more than 320k tonnes pa by utilising the terminals at Maputo, Durban etc., then double that target.
Historically it’s been between 24-31 August, last year the 31st. I’d guess the 31st again. I expect BISI and LAS to publish their results on the same day. Of more interest will be the dividend and what they intend to do with all the cash they’re making. TGA has a dividend yield of about 40%. I would hope BISI tries to be fairly competitive and announces something similar, ie around 50p.
Yes, they say cash is king, and LAP won’t object to a nice divi. They’re currently refinancing a couple of chunky loans and the more cash they have, the better the terms are likely to be. A decent divi from BISI might also result in LAS reinstating their own dividend. For example, if LAS fully passed on a 20p per share divi from BISI, LAS’s divi would be 1.04p, currently a yield of about 4%.
Beza, I too have been buying yesterday and today. The mkt cap is basically more than fully covered by the underlying value of BISI shares, leaving £40 mn of property assets (after netting off net debt) in for free.
Glencore has agreed an annual contract to supply Nippon steel with thermal coal at US$375 per tonne. This will set a benchmark for many fixed-price contracts this year. BISI don’t publicise their own arrangements with customers, but this is very bullish news for all miners.
I buy a few most days. Sometimes you have to get in early and/or break the order up into manageable sizes, ie no more than 500 at a time.
It appears that international thermal coal buyers are fearful of not being able to buy during the winter, so are stockpiling whatever is available now, at any price. Large Aussie miners such as WHC report that their Japanese and Korean customers want WHC to commit to long term contracts, price being of secondary importance. Hence strong upward pressure on spot prices. It’s a sellers market at the moment, and all thermal coal miners are making a fortune.
It is a huge increase, unprecedented, and judged to be fanciful by the market apparently. But the company’s mining performance is reported to be little changed compared with last year, and thermal coal prices were 120% higher in H1 than the 2021 average. According to the futures market, prices are expected to average 140% more in 2022 as a whole than last year (ie £135 more per tonne). BISI produce over 1 mn tonnes pa. That’s potentially higher revenues and profits of £135 mn! Of course, BISI sells its coal at a substantial discount to the benchmark prices, so it won’t make anything like that. But it is almost certainly going to be a very substantial amount more than last year.
Hello Beza. I base my cash accounts on the Consolidated cash flow statement of the company, which had £4.432 mn positive cashflow from operating activities in 2021, see p59 of the Annual Report. That's equivalent to 41.5p per share undiluted. The company has stated results in 2022 H1 will be "very substantially ahead" of the whole of 2021. That suggests at least a 100% increase, for any relevant metric. My best guess for the above measure of cashflow is currently £14 mn.
I've compiled monthly BISI accounts, consistent with my estimates for cashflow for the six months to June, and 12 months to December. The accounts are fairly disaggregated for interim and annual accounts, less so for the equivalent monthly accounts, but do utilise monthly coal prices and exchange rates.
BISI would only have started to notice a pickup in cashflow during April, once they had company accounts for March. Hence the relatively modest dividend announced at end-April when they published the annual financial statements. Cashflow then proceeded at over £3 mn per month in April and May (according to my estimates!), resulting in the 6 June profit warning.
I can't allow for lags between benchmark coal prices and realised prices, as I have no information on how long they are, but they do exist. However, at the moment the futures markets are indicating that prices will peak in July, then start to drop off steadily. This may be revised once the August 10 deadline kicks in for the EU to cease buying Russian coal. BISI cashflow is currently expected to peak during the current quarter at about £3.5 mn per month, then slow to £3 mn per month in Q4.
Black Wattle ... "produces high-quality export steam coal" (RNS 20/10/2010). And yet in 2021, TGA averaged export prices for its thermal coal of US$104/t, whereas BISI averaged only US$76/t, a 27% discount. TGA has averaged about US$226/t in 2022 H1, a 117% increase on last year. This increase would have been higher still, only a worse coal mix depressed prices somewhat this year. Since the thermal market has tightened considerably, can BISI negotiate prices somewhat closer to those of TGA for its own high quality coal? The interims should tell us.
Various Annual Reports have hinted at the importance of the relationship with Vunani for future expansion of BISI’s mining activities. To date, nothing has come of these aspirations. Now that BISI is printing money, and sharing it with Vunani, both parties are heavily incentivised to make concrete progress, and now have the capital to do so. Andrew Austin and others have exploited the majors disinvesting from North Sea oil and gas, I wonder whether similar opportunities apply to South African coalfields? If they do, and Vunani has political clout, the longer term prospects for BISI could be astonishing. Totally overlooked by the market as yet.
Whitehaven (WHC.ASX) announced its Q2 results today. Whitehaven benchmark their achieved prices for sales of thermal coal against Newcastle thermal coal prices, the latter averaging US$377/t in Q2 and US$320/t in 2022 H1. The discount to benchmark shrunk from 15% in 2021 H2 to just 2% in 2022 Q2. Moreover, achieved prices inherently lag a rising benchmark due to timing differences related to shipping. So the tightness of the global thermal market had effectively eliminated the discount altogether. Bodes well for BISI export pricing this year.