Investors pile into coal as Ukraine invasion tests supplies

Shares in Australia’s thermal coal producers soared as much as 10 per cent on Thursday as the once unloved commodity entered a boom.

Mar 03, 2022, updated Mar 03, 2022
Coal is stockpiled before being loaded on to ships at the RG Tanner Coal Terminal in Gladstone. (AAP Image/Dave Hunt)

Coal is stockpiled before being loaded on to ships at the RG Tanner Coal Terminal in Gladstone. (AAP Image/Dave Hunt)

Russia’s invasion of Ukraine has added to already severe supply constraints to boost demand as nations that had been big buyers of Russian coal sought out new supplies.

The Queensland Resources Council said thermal coal prices were already at near record levels, with current thermal coal price futures having doubled since the start of the year.

“As a result, companies are already looking at opportunities to expand production wherever possible,” the organisation said.

“However, with many mines already at full production, there is limited scope for additional coal to export to Europe.”

It comes as Brisbane-based Stanmore Resources announced it would tap the markets for $US506 million ($A694 million) to fund its purchase of BHP’s stake in a Queensland coal joint venture, known as BMC.

Success in the strategy would mean Stanmore had grown from a company which bought its first mine off the scrap heap for $1 in 2016 to become one of Australia’s leading coal producers.

Newcastle coal has jumped to $US435 a tonne, similar to prices for coking coal and that has pushed up stocks in the sector. New Hope jumped above $3 on the ASX this morning, the best price since 2019.

Terracom was up as much as 9 per cent, Yancoal 10 per cent and Whitehaven 9 per cent.

Bowen Coking Coal was also up 6 per cent.

Stanmore’s capital raising also coincided with the company raising $120 million in debt. The overall cost of the deal with BHP was $US1.1 billion with extra payments if benchmarks were reached.  Stanmore would access the rest of the funds through debt and internal cash.

The company would raise the funds through a seven-for-three renounceable, accelerated entitlement offer.  It also announced today another $US120 million would be raised through debt.

Its parent company, Singapore based Golden Investments, would subscribe for $US300 million in the offer, but would be selling down its stake through the offer to 64.1 per cent from 75 per cent.

Stanmore said the deal was transformational for the company and would create a metallurgical coal producer with a portfolio of high-quality assets.

In its half yearly results, Stanmore said it expected the market to remain tight after prices reached record levels.

Stanmore said forecast production for the combined business for the six months ending December 2022 would about 5.9 million tonnes to 6.5mt. It would have four mines and three wash plants within a 50km radius that had the ability to increase production with little ramp up risk or development.

Petra Capital will underwrite $283 million of the offer.


Coal has not been the only beneficiary. Supply chain issues have forced significant jumps in commodity prices.

ANZ said in a report this morning that exporters were still finding it hard to access shipping containers.

Dairy prices jumped 7 per cent in February and whole milk powder was up 9.5 per cent. Butter and cheese were at record prices.

Aluminium prices were also up 8 per cent after reaching double digit increases in January and much of this is because Russia is a major supplier.

The ANZ world commodity index was up almost 4 per cent in February, a record high.




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