Coal stocks lost steam

Coal-related stocks lost steam this morning on weakened thermal coal prices. Shenhua and China Coal dropped 4.2% and 3.53% respectively in Hong Kong, while Bumi Resources and Adaro declined 1.98% and 0.53% on IDX this morning.
Bukit Asam, Indo Tambangraya, and Indika also declined, while BHP and Rio Tinto lost 0.42% and 0.3% respectively in Sidney. Delta Dunia Makmur (DOID) declined further by 1.42% to Rp1390. The stock has lost 36% from its peak last year. But trading volume was relatively small.

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Pan Asia Expands Kalimantan Mine

Australian company Pan Asia Corporation Ltd (ASX code: PZC) announced on Wednesday that it has signed a memorandum of understanding (MoU), outlining the proposal to expand the main ATA open pit mine into the TCM concession.

It said the MoU was a result of the company’s discussion with the contracting company currently responsible for mining at a second open pit in the PT Arutmin ATA concession.

Pan Asia said upon further technical investigation, it is both parties’ intention to sign an agreement to cooperate in the mining and trading of coal. The agreement will outline in detail the key commercial terms, including the tonnage to be extracted, the mining rate, the timeline and the profit sharing arrangements.

Importantly, it (Pan Asia) will not bear any capital cost associated with the development of these open pit mining operations. It said it will also benefit upon the completion of the open pit mining as the finished open pit will allow the company to access to possible underground coal mining operations at TCM. It will also save “significant capital expenses” in developing these future underground operations.

Pan Asia CEO Alan Hopkins was happy with the progress as the company “will have near-term cashflow without bearing any of the capital costs, typically associated with developing an open pit mine.”

To asses the plan expansion to the neighboring open pit mine, the company’s drilling activities are now focusing on an area 1.6km x 1km, located adjacent to the ATA pit. The latest two holes drilled in this area returned significant coal intersections, it said.

Coal samples are being sent to PT Interfek Utama Laboratory Services in Banjarbaru, Kalimantan, which is a fully internationally accredited coal testing laboratory.

Pan Asia is a rapidly growing diversified resources company listed on the Australian Securities Exchange. It has offices in Perth, Australia and Jakarta. The company aims to be a major supplier of key resources into the expanding Asian markets. (Roffie Kurniawan)

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Bayan amends coal sale facility agreement

Coal miner PT Bayan Resources Tbk said on Tuesday that it has signed deed of amendment over facility agreement and FOB (free on board) contract for the sale & puchase of coal with Vitol Asia Pte Ltd last Thursday (Feb 25).

The original facility agreement between the two parties was signed on Nov. 25, 2007 . The second amendment was made on June 25, 2009 .

Under the latest amendment, installment made by Bayan Resources is raised to US$6.5 from US$5, for every ton of coal delivered to Vitol.

Both sides also agreed to delay the delivery of coal amounting to 1.18 million tons from initial plan of 2010 to between 2011 and 2014.

In addition, it was also agreed to reduce the recovery amount that must be paid under export contract worth US$9.26 million. (Roffie Kurniawan)

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Richard Ong resigns, Martin Purvis new CEO for Straits Asia

Richard Ong Chui Chat, 62, has resigned as Chief Executive Officer of Straits Asia Resources Ltd, a coal producer listed on SGX and controlled by PTT (Thailand) which controls two concessions (Jembayan and Sebuku) in Kalimantan.

Richard Ong has a direct and a deemed interes in 7.625 million and 550,000 shares of Straits Asia which dropped further by 2.42% on Friday trading. The stock surged 270% in the period of March 2009 until early January 2010. But in the past eight weeks, the stock has lost 26%.

Martin Purvis, a director of Straits Asia since November 2006, has been announced as the new CEO, taking over the role from Richard with effect from March 1, 2010. Martin was responsible for the original development of the Company’s Sebuku Coal Mine in 1997. He is a mining engineer with more than 25 years experience in the resource industry working in senior management roles in Indonesia, South Africa and Australia. Mr Purvis is currently Chief Executive Officer of PTT Asia Pacific Mining, which controls 46% of Straits Asia's shares.

Mr Ong took up the role of Chief Executive Officer of Straits Asia in May 2007. Straits produced about 9 million tons of coal per annum from Jembayan and Sebuku mines. Thailand's PTT acquired majority control of Straits Asia Resources Ltd from ASX-listed Straits Resources Limited.

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Coal stocks burnt down

Coal stocks are mainly in negative territory this morning. BUMI, the most traded coal stock on IDX, lost 5.21%, while Adaro declined 2.72%. Indika and Bukit Asam also lost ground, but ITMG recovered slightly by 0.17%.

Almost 150 million BUMI shares exchanged hands this morning. The stock dropped to Rp2275, the lowest since December 22, 2009. The stock has lost 35% its value from its peak last year and 73% below its all time high in June 2008. The stock was even bigger than Telekomunikasi Indonesia (TLKM). But now, BUMI is even smaller than ADRO in terms of market capitalization.

Looks like IDX-listed coal stocks experienced a delayed correction after long period of rally since February 2009. China Shenhua and China Coal regained grounds this hour by 1.3% and 1.1% respectively in Hong Kong. Straits Asia also gained 0.5% on SGX, while BHP advanced by 0.9% in Sidney. Xstrata, the world's largest thermal coal exporter, gained substantially by 3.35% yesterday in London.

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IDX opens lower, coal weighs

IDX composite index lost 1% in the first hour of trading this morning as coal stocks lost ground on correction in thermal coal spot prices and profit taking.

Adaro and Bumi Resources declined 1% respectively, while Indo Tambangraya dropped almost 2%. Indika and Bukit Asam also declined 1% respectively. Their peers opened higher mainly in the region, except Shenhua which declined 0.32% in Hong Kong. BHP, Rio Tinto, and Straits Asia regained grounds on ASX and SGX.

Metals also lost ground, led by Yunnan Tin which crashed 10.43%, while Timah declined 1.22%. Aneka Tambang and INCO also lost 1.5% and 0.72% respectively.

Oil and gas stocks are also under pressure. CNOOC and Petrochina lost 2.93% and 0.83% respectively in Hong Kong, while Elnusa declined 1.6% in Jakarta.

Banking stocks? Well, correction continues with Mandiri and BRI dropped over 2% respectively, while BCA and Danamon declined 1.1% and 2.8% respectively.

Profit taking on blue chip stocks hit the composite index and dropped almost 2% after 30 minutes of trading. TLKM, Astra International, Gudang Garam, United Tractors, Indofood, PGN were all in negative territory this morning.

Rupiah also opened lower at Rp9410/USD from 9335 last Friday.

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Thermal coal prices drops 6.8%

Thermal coal prices in Newcastle Port, Australia, for the week ended February 5th, 2010 dropped 6.8% to US$91.83 per ton. The commodity reached its peak two weeks ago at US$99.26 per ton.

Newcastle Port is the benchmark for Asian market. GlobalCoal's monthly NEWC Index has surged from US$71.74 per ton in October 2009 to US$95.2/ton last month. That was the highest level for almost 14 months. RB Index, which tracked thermal coal prices in Richard Bay port, South Africa, reached US$86.02 per ton last month, while DES ARA Index (Europe) at US$85.99 per ton.
Coal stocks closed mainly lower in the region on Friday. On IDX, Indo Tambangraya and Indika dropped 6% respectively, while Bumi Resources lost 4.85%, Bukit Asam -4.15%, and Adaro -3.63%. Trading on coal stocks was substantial. Total trading value of coal-related stocks was above Rp1.5 trillion.
They're not alone. China Coal and Shenhua crashed 6.53% and 4.71% respectively in Hong Kong, while Straits Asia conceded 6% on SGX and BHP -3.51% on ASX. Xstrata, the world's largest thermal coal exporter, lost 4.65% in London.

In the meantime, crude oil lost nearly 3% to settle at $71.19 on the New York Mercantile Exchange yesterday. Oil dropped as low as US$69.5 per barrel earlier Friday. As a result, crude has now dropped over 14% from its recent peak early last month (US$83/barrel).

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Thermal coal prices surge 12.8%

Thermal coal spot prices for the week ended January 8 in Newcastle Port, Australia---a benchmark for Asia---closed at US$95.61 per ton, surged 12.8% from the previous week. This is the highest level since late 2008 and the biggest weekly gain so far. It has triggered speculation on coal stocks worldwide.

According to data released by GlobalCoal, the world's leading online coal trading platform, thermal coal spot prices (monthly average) in September 2009 was US$68.16 per ton. So, this week's price is 40% above September. Once parcel has reportedly sold at US$100 per ton. Still, the current weekly price is 51% below its peak in 2008 when crude oil was around US$147 per barrel.

Richard Bay Index, South Africa, has also surged from US$60 per ton in September 2009 to US$80.6 last week or a 33.3% gain, while ARA Index (Europe) increased from US$67/ton in September 2009 to US$84.16 per ton last week.

Bumi Resources and Adaro Energy gained substantially by 7.41% and 6.52% today with combined trading value above Rp2.37 trillion or about US$250 million. BUMI has gained almost 20% this week. 

Xstrata, the world's largest thermal coal exporter, has gained 58% since September 2009. Shenhua, China's giant, surged 30% in the same period. 

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When Adaro is bigger than BUMI

Adaro Energy (ADRO) closed 2009 as the biggest coal company in terms of market capitalization with Rp55.3 trillion, bigger than Bumi Resources (Rp47 trillion) even though it produced far less coal and has far smaller assets. The combined market capitalization of six major coal producers listed on IDX is US$22 billion.

BUMI was the most active stock traded on the whole exchange. The company is also the most aggressive in raising new loans. BUMI and ADRO raised over US$5 billion from the debt market in 2009. Combined with Bayan and Indika, coal producers raised lot more loans than any sector in the country.

BUMI stock price surged 166% in 2009, while Adaro skyrocketed by 257%. Third largest coal producer in terms of market cap is Bukit Asam (Rp39.7 trillion), followed by Indo Tambangraya (Rp35.9 trillion), Bayan Resources (Rp18.8 trillion), and Indika Energy (Rp11.6 trillion).  

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Straits signs US$380M loan

Straits Asia Resources Limited, which controls coal concessions in Kalimantan, has signed a five year club financing facility of US$380 million today.
The facility is fully committed for five years and comprises a term loan US$250 million, revolving working capital of US$50 million, and LC/bank guarantee facility of US$80 million.
The facility will be used to refinance an existing US$255 million facility, and provide working capital for expansion of coal production.
The club of banks participated in the facility are Siam Commercial Bank, Krung Thai Bank, Bangkok Bank, and Standatd Chartered Bank. PTT is the controlling shareholder of Straits Asia which produce about 10 million tons of coal in Sebuku and Jembayan mines in Kalimantan.

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Thermal coal regained grounds

Thermal coal spot prices in Newcastle Port, Australia, key benchmark for Asian market, closed substantially higher by 1.5% for the week ended December 18 at US$81.06 per ton.

This is the first week of gain after three consecutive weeks of insignificant correction. Meanwhile, thermal coal spot prices in Richard Bay, South Africa edged up 4% to US$72.7 per ton, and those in Western Europe increased 2.4% to US$78.65 per ton. 

Still, coal spot prices are way below their 2008 peak. In fact, the Richard Bay index lost 13.6% this year, while ARA index declined 7.5%. Newcastle, meanwhile, only lost 0.5% which may a sign of relatively stronger recovery in Asian market this year.

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Handini & Toba Jaya alliance in coal

ASX-listed Handini Resources has entered into a memorandum of understanding with PT Toba Jaya to formulate a JV or cooperation to jointly carry out mining activities in the coal concession at Muara Bungo, Indonesia.

In May 2006, Handini entered into a JV agreement and subsequently the amended and restated agreement dated September 30, 2008 with PT Nusantara Thermal Coal, a contractor to the government of Indonesia in a CoW, whereby NTC has agreed to sell to Handini coal from its mine in the aggregate amount of 14.4 million tons under certain terms and condition.

Toba Jaya is an established mining contractor in Indonesia. This company is willing to provide necessary expertise, machineries, and working capital to carry out mining activities in the NTC coal tenement jointly with Handini.

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Elray finalizes Kalimantan coal acquisition

Elray Resources Inc, a junor exploration and development corporation, which has successfully accumulated a portfolio of five highly prospective, heavily mineralized mining tenements in South East Asia, is finalizing the terms for the heads of a royalty agreement over a coal concession in Kalimantan.

Elray is also completing due diligence on the gold prospect in south of Jakarta. Elray controls Buntok gold, mineral sands, and zircon project as well. The coal project in Kalimantan covers an area of 8788 hectares called Makikit project.
With the Makikit Indonesian coal project, upon the execution of a Joint Venture Agreement, the coal deposit will be subject to a full feasibility assessment.

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IDX = Coal Stock Exchange

Trading value of nine coal-related stocks at Indonesia Stock Exchange (IDX) on Thursday, November 12 reached Rp3.5 trillion or about 63% of the total trading value on the market. That's why we call IDX with new name: Coal Stock Exchange. 

BUMI was still the busiest casino with trading value of Rp1.8 trillion. But Adaro Energy (ADRO) closed the gap with trading value of Rp585 billion. The third largest was Indo Tambangraya Megah (ITMG) with Rp241 billion and the new kid on the block, Delta Dunia Makmur (DOID), with Rp127 billion.

Some traders said "coal is just too HOT to resist." The combined market capitalization of six major coal players on IDX is currently US$19.2 billion, declined 47% from their peak last year of US$36.5 billion. Interestingly, BUMI is not the largest coal stock anymore, in terms of market cap. ADRO has taken over BUMI's number one spot with market cap of US$5.23 billion, followed by BUMI with US$4.7 billion, Bukit Asam (US$3.4 billion), Indo Tambangraya (US$2.9 billion), Bayan (US$1.85 billion), and Indika (US$1.16 billion).

Other traders said "but I'm bit worried about burning down of coal stocks." Why? 

Well, with the exception of BUMI which is 73% below its peak last year, others are currently traded less than 45% below peak. ADRO is even traded 13% below its peak. Why people were so optimistic about coal while the actual prices of thermal coal may not recover to 2008 level for sometime?

Coal stocks have surged substantially this year. BUMI, for example, recorded 465% gain since January 15. Adaro has tripled (+212%) this year. United Tractors +257%. They might be dreaming of similar gains in the next few months. Nothing wrong with that. But...

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Adaro shareholders restructure ownerships

PT Adaro Energy (ADRO) Tbk announces that the key shareholders intends to restructure some of their holdings of stock into a single entity called PT Adaro Strategic Investment, which directly owns 43.91% shares of ADRO.

ADRO told investors this morning that the shares of Rachmat family, Thohir family, Subianto family, Mr Edwin Soeryadjaja, and Mr Sandiaga Salahuddin Uno, are consolidated into PT Adaro Strategic Investment.

Adaro is the second largest coal producer in Indonesia with market capitalization of Rp38.4 trillion or about US$3.8 billion. So, the value of ASI's shareholding in Adaro is about US$1.7 billion. The stock has surged 140% this year. 

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Churchill updates East Kutai coal project

Churchill Mining Plc, the Indonesia-focused mining company with a JORC-compliant resource of 3.18 billion tons of thermal coal at its East Kutai coal project, remains confident it could produce 20 million tons per annum of coal for at least 20 years despite the delay in the first JORC-compliant coal reserve statement.

"I am disappointed that the JORC category updates are taking longer than anticipated and would like to thank investors for their patience and appreciation of the vast volume of data, which needs to be analyzed to make the calculations," Paul Mazak, Managing Director of Churchill said in a statement sent to Indonesia Today. 

Churchill is presently finishing the upgrade into categories of its 3.18 billion tons JORC-compliant classifications for 1.412 billion tons (measured 118 million tons, indicated 322 MT, inferred 972 MT) of this global resource with the balance due to be modelled by July 2009.

In May 2007, Churchill announced a sales agreement to purchase a 75% interest in the East Kutai coal project from PT Techno Coal Utama. 

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Garda Tujuh Buana: No gain so far

The newly listed coal player PT Garda Tujuh Buana (GTBO) Tbk succeeded in raising Rp210 billion from the IPO of 73.4% issued shares last week. Unfortunately, the first six days of trading have gone without a single day of gain.

GTBO's IPO price is Rp115. The first day of trading, July 9, the stock lost 8% straight, even though the stock once jumped as high as Rp126. The second day, July 10, the stock gained 5%, but since then continued the downfall to close at Rp101 on Thursday or 12% below its IPO price.

The stock is not a sexy stock with less than US$27,000 trading value in the past two days even though the management has tried to attract investors with "promising" outlook. GTBO claimed its coal production would jump to 900,000 tons this year (from 30,000 tons last year) and double to 1.8 million tons next year.

Well, the bubble on coal stocks have busted. We have experienced a "mini bubble" on coal stocks this year where most of them gained over 100%, faster than recovery in coal prices. Thermal coal prices are hovering around US$70 per ton (normally for 6000 Kcal/Kg coal), only 36% of last year's peak of over US$190 per ton. Interestingly, some coal stocks are currently traded only 20%-30% below their peak last year.

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Kepco invites coal supplier

Kepco SPC Power Corporation (KSPC) invites coal suppliers to participate in an open bidding to supply 320,000 tons per year of coal for its Cebu power plant. 

KSPC is the operator of 2x100 MW coal-fired power plant in Naga, Cepu province, Philippines. Earlier last week, another Philippine electricity provider Napocor awarded 2x65,000 tons of coal at US$80.93 - US$81.03 per ton (CIF) to Trubaindo Mining and 65,000 tons at US$79/ton (CIF) to PT Delta Mineral.

In February 2009, Napocor awarded Trubaindo 260,000 tons for April-July 2009 delivery and Indominco at 585,000 tons for March-September 2009 delivery. 

Napocor plans to import 3.5 million tons of coal this year, significantly below last year's 4.18 million tons per year. 

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Mining royalties to be raised

Mining companies might have to pay higher royalties as the State seeks higher income from the sector. 

Simon Felix Sembiring, special staff for energy and mineral resources minister, said government is the process to negotiate the raise of mineral royalties with all existing mining companies, including those under coal contract of work (CCOW) which currently pay 13.5% of output.

Sembiring admitted the currently deliberated Mining and Coal Law No. 4/2009 stipulates that government shall honor the existing contracts. But he said, government as partner in the contracts could ask for negotiation to raise the royalty. 

"In fact the contracts clearly stipulate that if government asks for higher royalty, contractors shall do financial calculation. As long as they will not incur losses, they have no reason to reject a raise," Sembiring is quoted by financial paper Bisnis Indonesia today.

Well, we have repeatedly suggested the raise in mineral royalty. Bumi Resources, which controls KPC and Arutmin, for example, booked combined net profit of almost US$2 billion in the past five years. Even a 20% royalty for coal will cut only few percentage of net profit of coal companies.

Government should have raised the royalty few years ago. But nothing is too late for the something good for the country. The next important issue, of course, not only how to raise revenue for the State, but how the State will spend properly the revenues from natural resources.

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Baltic Dry Index weakens further

Baltic Dry Index, an indicator for worldwide shipping of commodities, dropped further to close at 2985 on Friday, July 10. Meanwhile, thermal coal spot prices in Newcastle, a benchmark for Asian market, closed lower by 2% last week.

Baltic Dry Index (BDI) lost 18% in one week from 3672 in July 3rd, 2009. BDI lost 30% from June 3rd, a clear sign of weaknesses in commodities market. CPO prices in Malaysia Derivatives Exchange closed at RM2010 per ton last Friday.

Bids for October delivery this morning reached as low as RM1895 per ton, while the benchmark September delivery at RM1990 per ton.

Meanwhile, thermal coal spot prices in Newcastle port, Australia, declined 2% for the week ended July 10 to US$71.63 per ton, while in Richard Bay (South Africa) and ARA (Europe) gained slightly to US$60.69 and US$66.01 per ton respectively.

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