- Coal in Australia, the production of which is concentrated in the Bowen Basin region in Queensland, has been one of the most significant exports of Australia in the past decades.
- Bowen Coking Coal Limited (“BCB”) has significantly advanced development assets located in the Bowen Basin, including one recently acquired.
- BCB is well-positioned to take advantage of the changing landscape of the demand-supply dynamics as well as pricing of coal globally.
Over several recent years, one of the largest exports in Australia has been coal, and the same has contributed significantly towards the total resource exports of Australia. In Australia, coal is used to produce more than three-quarters of the Country’s electricity requirements.
Most of the black coal in Australia is produced in New South Wales or Queensland. The black coal is used as both thermal coal as well as coking coal (or metallurgical coal) for industries like iron and steel industry.
One of the coking coal exploration and development company based in Queensland is Bowen Coking Coal Limited (ASX:BCB). The Company owns several coking coal projects in the world-renowned Bowen Basin. BCB’s project portfolio comprises of the following:
- Isaac River (MDL 444 AND EPC 830)
- Cooroorah (MDL 453)
- Hillalong (90% BCB and 10% Sumitomo) (EPC 1824 & EPC 2141)
In addition to this, the Company has entered into binding agreements with Peabody (Burton Coal) Pty Ltd to acquire a new coking coal project, the Broadmeadow East coking coal project, located within the Central Bowen Basin in Queensland.
With the accessibility of existing regional infrastructure, low capital intensity, and short development timeframe of the project, the Broadmeadow East coking coal project is now the most advanced project within BCB’s current portfolio.
The below image provides a snapshot of BCB’s current coking coal projects.
Coking Coal Opportunities for BCB (Source: Company's Report)
Let us take a look at the positioning of the Australian coal industry over the years and in the coming times.
Coal Substantially Contributes Towards Australia’s Exports
After iron ore, coal has been Australia's second-largest resource export for decades. The two main uses of coal - steel making and electricity generation have been driving the demand for coal across the globe. Australia's coal exports consist of various grades of black coal, which has lower energy content; thermal coal used for electricity generation; and metallurgical coal - which has a relatively high energy content is used primarily in steel making and also for other industrial purposes.
Moreover, seeing the sizeable contribution of coal exports from Australia toward the Australian economy, any material changes in export volumes and prices can have a significant impact on GDP and terms of trade of Australia.
Major markets for Australian coal are the economies in South-East Asia that have been growing strong, namely India, China, and Japan, indicating the growth in steel production and thermal coal electricity generation in the region.
Demand and Supply Dynamics
However, the landscape for the production and demand of coal has taken the driver’s seat in steering the price movements over the recent years. Notably, several factors like limited supply growth in the seaborne market, changes in demand for coal with different quality characteristics, changes in Chinese Government policies, have impacted the prices as well as supply-demand dynamics for coal worldwide.
More importantly, Australia contributes significantly (more than half) towards the metallurgical coal seaborne market, and its production is concentrated in the Bowen Basin region in Queensland. Subsequently, the seaborne market for metallurgical coal is likely to be significantly impacted by any disruptions in the Australian coal supply.
Seeing the increasing concerns being raised towards environmental protection; countries have formulated stricter environmental standards, like moderation in Chinese steel production. These restrictions are likely to put the demand for low-quality coal towards the end. Moreover, the changing landscape or coal production and demand for coal across the globe shall impact the investment decisions regarding coal.
The above scenario coupled with BCB’s significant portfolio of coking coal assets located in the globally recognised district for coking coal mines is likely to play a pivotal role in the growth of the Company. Through the location of its assets as well as their near term development status, BCB already has an edge in the current climate.
Moreover, the management team of the Company has a long history and deep experience in the global coal industry, covering technical, financial as well as operational aspects, which is vital for the success of an apsiring coal miner like Bowen.
BCB stock settled at a price of $ 0.052 on 10 July 2020 with a market capitalisation of $45.83 million.
(Please note: All financials are declared in AUD, unless otherwise specified)
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