Anglo Pacific Share Discussion Threads

[piedro] 03/7/2015 07:31

More of coal to fire your debates ...

World Coal Association welcomes China's continued commitment to low emissions coal technology
World Coal Association - July 2, 2015
... According to the International Energy Agency’s (IEA) New Policies Scenario Chinese electricity generation from coal will be 45% higher in 2040 than it is now – despite its total share of the energy mix reducing from 76% now to 52% in 2040. ...


:-)

[rcturner2] 03/7/2015 07:23

Price of iron ore dropped 6% overnight.

Some people have no clue what is actually happening out there in the real world.

[quepassa] 02/7/2015 22:32

Maybe the very wise move was by the CIO.

ALL IMO. DYOR.
QP

[christh] 02/7/2015 19:54

Likely to go to 120p and maybe 150p results day.
Maybe a dividend increase to 5p.

looking forward to shut a few mouths in this forum.

This is an ideal investment for pension funds as they get a very good yield.
Very wise move mr Treger.

see for yourselves

[quepassa] 02/7/2015 18:09

Excellent post, RCT.

Your are right about the head and shoulders formation. I think it has a lot more to fall.

Likely to go sub 80p -the recent fund-raising price- in short order in my view on the back of so much negative sector news and the dramatic fall in coal prices which hurts royalty income so badly.

ALL IMO. DOR.
QP

[neilyb675] 02/7/2015 18:03

Coal (from the Old English term col, which has meant "mineral of fossilized carbon" since the 13th century)[1] is a combustible black or brownish-black sedimentary rock usually occurring in rock strata in layers or veins called coal beds or coal seams. The harder forms, such as anthracite coal, can be regarded as metamorphic rock because of later exposure to elevated temperature and pressure. Coal is composed primarily of carbon along with variable quantities of other elements, chiefly hydrogen, sulfur, oxygen, and nitrogen.[2]

Throughout history, coal has been used as an energy resource, primarily burned for the production of electricity and/or heat, and is also used for industrial purposes, such as refining metals. A fossil fuel, coal forms when dead plant matter is converted into peat, which in turn is converted into lignite, then sub-bituminous coal, after that bituminous coal, and lastly anthracite. This involves biological and geological processes that take place over a long period. The United States Energy Information Administration estimates coal reserves at 948×109 short tons (860 Gt).[3] One estimate for resources is 18 000 Gt.[4]

Coal is the largest source of energy for the generation of electricity worldwide, as well as one of the largest worldwide anthropogenic sources of carbon dioxide releases. In 1999, world gross carbon dioxide emissions from coal usage were 8,666 million tonnes of carbon dioxide.[5] In 2011, world gross emissions from coal usage were 14,416 million tonnes.[6] Coal-fired electric power generation emits around 2,000 pounds of carbon dioxide for every megawatt-hour generated, which is almost double the approximately 1100 pounds of carbon dioxide released by a natural gas-fired electric plant per megawatt-hour generated. Because of this higher carbon efficiency of natural gas generation, as the market in the United States has changed to reduce coal and increase natural gas generation, carbon dioxide emissions have fallen. Those measured in the first quarter of 2012 were the lowest of any recorded for the first quarter of any year since 1992.[7] In 2013, the head of the UN climate agency advised that most of the world's coal reserves should be left in the ground to avoid catastrophic global warming.[8]

Coal is extracted from the ground by coal mining, either underground by shaft mining, or at ground level by open pit mining extraction. Since 1983 the world top coal producer has been China.[9] In 2011 China produced 3,520 million tonnes of coal – 49.5% of 7,695 million tonnes world coal production. In 2011 other large producers were United States (993 million tonnes), India (589), European Union (576) and Australia (416).[9] In 2010 the largest exporters were Australia with 328 million tonnes (27.1% of world coal export) and Indonesia with 316 million tonnes (26.1%),[10] while the largest importers were Japan with 207 million tonnes (17.5% of world coal import), China with 195 million tonnes (16.6%) and South Korea with 126 million tonnes (10.7%).[

[christh] 02/7/2015 17:47

The commodities are all down, as the whole sector is down.
APF is not directly involved with mines but because it derives its income from mining stocks has fallen from 95p to 85p and also it went x-divi which is common for stocks.

We near results and that will give it momentum for a rise.

Remember the ceo has bought shares using his own money before the closing period.
That should tell you something.

[rcturner2] 02/7/2015 16:41

As I said above a nasty head and shoulders forming and sure enough dropped from 95p to 85p.

[neilyb675] 02/7/2015 14:01

QP would be:

A lover of animals that walks past the zoo to hear the lions calling

A lover of football that walks past the ground to hear the crowd noise when a goal goes in

A lover of coal but can't bring himself to.admit it

Or is he one of lifes non-participants......defo ill in the head.

[christh] 02/7/2015 13:46

QuePassa
2 Jul'15 - 12:45 - 7377 of 7377

The Monkey spoke.
He has not even got any peanuts!

[rcturner2] 02/7/2015 12:39

Neil, the thing that makes me laugh is you have posted on a long list of bulletin boards about your holdings, almost all of which have tanked, APF being no exception. When you were asked to name a success of yours you choose Balfour Beatty which promptly nose dived massively. Yet you think QP is the fool here?

[neilyb675] 02/7/2015 12:22

QP - released from Broadmoor and now we have to suffer this fool !!

[christh] 02/7/2015 10:56

Qp,
mentally disturbed.
Beware of this monkey!

[rcturner2] 02/7/2015 10:34

The very fact that the two main holders posting on this thread are Neil and Chris tells you to stay well clear here. Both are half-wits.

[quepassa] 02/7/2015 10:30

Hi Bolador,

Good post. Thank you for your useful contribution. I have voted your post up.



Yes some fair but points but what so many people on this bulletin board blithely ignore is the PRICE of coal. They just think about the amount of coal being dug out of the ground.

You see, even if production at any given mine goes back up, the income from that cannot hope, in my opinion, to be anything like in the boom years.





There are TWO factors affecting coal:-

1. The SUPPLY-DEMAND equation, and

2. The PRICE


For sake of argument, let us assume that demand for coal is constant into the next twenty years. Not significantly higher demand, nor significantly lower demand. (Personally I think it will fall).

But the SUPPLY side has without doubt increased enormously. There are new mines in India, The Far East, Asia, Mongolia. Lots of new cheaper coal from the local areas which want it. Big competition for Australian coal which is SEABORNE coal facing major transportation costs to take it across the oceans to the places which need it. Those transportation costs for Australian coal are its Achilles' Heel.

The SUPPLY side of coal has enormously increased. There is over-supply. Too much competition. China has gone ex-growth. The puff has come out of the China bubble. It caused too many new mines to open up, when China was going hell-for-leather.

These factors are why THE PRICE of coal has fallen off a cliff.

Let's just focus in on the price of COKING COAL for example which APF has significant investments in.

According to Mining.com , coking coal peaked at a stonking $330 per tonne in 2011 and has now fallen some 70% to a level of $90-100 dollars recently. That is a price which has not been seen since 2004.

Here is a link:





This is a disaster in my opinion for anyone receiving coal royalties such as the Government of Queensland.

Queensland's coal royalties are not a flat rate per tonne irrespective of market price.

Queensland's royalty rate is based on BOTH the amount of coal which is mined AND the current price.

When you factor this in, it is hardly surprising that they have pre-announced a hit to their expected royalties of some $3-4billion over the next few years.

If for example, Queensland was receiving a royalty on a mine where tonnage had slipped, not only will they suffer a royalty on a lower volume but that rate of royalty is fantastically lower. So, even if the theoretical mine ramps production back up, the royalty receipts will be astonishingly lower than in the 2011 boom times. With little prospect of getting back there due to the new competition.

This impacts on Queensland in two ways:

1. The amount of royalty receipts is much lower which gives Queensland a lot less income

2. The valuation of the asset falls because the value of their royalty is based on expected future yields on their royalties. With the big recent falls in coking coal prices, the valuation of the royalty must de facto be lower. They may have to mark down the value of the asset on their books.


This is a link to the official website of the Queensland Government which gives rates for royalties.

If my understanding is correct, Queensland receives coal royalties on the following sliding scale:-


Coal price up to $100 per tonne - 7% royalty

Coal price up to $150 per tonne - 7% on first $100, then 12.5% on balance

Coal price over $150 per tonne - 7% on first $100, then 12.5% on next $50, then 15% on balance.



If my understanding is correct, APF receives royalties on the same basis and sliding scale as Queensland.

It is interesting to compare the likely lower royalty payments which mining companies may or may not now be paying to the Queensland Government compared to a few years ago.


Herewith link. When you are on the page, scroll down to coal:-




Now for some maths.



I hope my calculations are correct(ignoring allowable expenses etc) and believe they are but would welcome if someone could check them.


The following is frightening.



When coal was $330 per tonne, Queensland received a stonking royalty of $40.25 per tonne ( being $100 x 7%, plus $50 x 12.5%, plus $180 x 15%).

When coal was $200 per tonne, Queensland received a royalty of $20.75 per tonne ( being $100 x 7%, plus $50 x 12.5%, plus $50 x 15%

When coal was $150 per tonne, Queensland received a royalty $13.25 per tonne

When coal was $100 per tonne, Queensland received a royalty of $7 per tonne.

When coal is $80 per tonne, Queensland receives a royalty of $5.6 per tonne.




To go from a royalty of $40.25 per tonne when coal was $330 per tonne to a royalty of $7 per tonne when coal is $100 per tonne is very significant.


Queensland may be facing a double-whammie on certain mines where production is down. And even if it production did increase somewhat at that mine in the face of stiff competition, the royalty it receives will be a small fraction of what it received in the China-fuelled 2011 boom years.

It is not a favourable time for Queensland as a royalty-holder and that it why it has taken the action with its forthcoming State Budget on 14th. July.

ALL IMO. DYOR.
QP

[quepassa] 02/7/2015 10:23

The mouse has squeaked again this morning.
Post 7329 refers.

ALL IMO. DYOR.
QP

[christh] 02/7/2015 09:26

RCTurner2 2 Jul'15 - 09:10 - 7368 of 7369

Mr Hahaha useless poster aka QP.

Unless you are having the same medication?

[christh] 02/7/2015 09:23

Kestrel is one major contributor to APF income.
However the last aquisition made which is becoming a good strong royalty for APF
along with other European investments will pay off substantially and overtake the
reliance on Kestrel.
One major point to note is the confidence of the ceo to buy shares for his pension i.e he put his own money to buy the shares.
Which means the dividend will be increased gradually to the level that it was before just, under 12p(ceo's always know how to boost their income).
The current yield is good, 8p dividend a year ...not many will pay you that in the
ftse 100 or ftse 250.

Remember commodity stocks are cyclical stocks and maybe in a couple of years or earlier depending on global problems, commodity stocks will be highly valued and too expensive to buy.
Still waiting to get to 300p and higher as business improve.

[rcturner2] 02/7/2015 09:10

hahahahhahahahaha

[neilyb675] 02/7/2015 08:58

good post bolador, QP put firmly in his place (even if that was required since he is not invested, has no intention investing and as such is rightfully labelled mentally ill).

[bolador] 02/7/2015 08:34

Que Passa,

Coal is in a bear market, that is the gist of what you are saying and it cannot be denied. However the idea that 38% of world energy generation can be readily switched to alternatives is a no go.
Therefore whilst BLT and Rio are offering/have offered their coal portfolios they have been successful in attracting interest. Deals are being done.Please note that large corporations are not immune from doing take over deals at the top of the market and making disposals at the bottom. Coal will not always be in a bear market. Interestingly Bill Gates recently saying that as the costs of solar and wind makes them unviable as an alternative on a global scale he calls for government funds to be diverted away from subsidy into R&D. Coal is becoming cleaner all the time this is down to R&D.As to APF and the Kestrel valuation the shares are 95p not 300p.

[quepassa] 01/7/2015 16:18

USA.

Peabody Energy down a whopping 24% in trading today after releasing Second Quarter Update on 2015 Financial Targets.

Earnings expected to be BELOW ORIGINAL TARGETED RANGE due to weather and LOWER SEABORNE COAL PRICING.

Extract from Peabody's press release:-

•The company was also impacted by approximately $20 million from the effects of lower pricing on Australian metallurgical coal, with approximately half related to spot coal sales during the quarter and half related to reduced coal inventory valuation due to benchmark third quarter settlements. Spot metallurgical coal prices declined 15 percent during the quarter before increasing in recent weeks.


Herewith link to Peabody release.





Peabody's results further corroborate Queensland's expectations of lower royalties.

ALL IMO> DYOR.
QP

[quepassa] 30/6/2015 13:06

No. You always make good comments.

But the question is how will the Kestrel royalty be valued on the books of APF going forward by the external auditors once they observe from undoubted external sources how the State of Queensland is treating its own likely future royalty receipts?

Remember that APF's royalty on Kestrel mirrors the royalty payment structure received by The QLD State, if my understanding is correct.

Given the recent big slide in the price of coking coal, one wonders how that may or may not impact on the balance-sheet valuation/carrying value of the Kestrel royalty, or indeed any other coal royalty acquired recently or not recently.

Your question about diversifying the asset base is an interesting topic in view of APF's recent acquisition which just concentrated risk further onto coal.


ALL IMO> DYOR.
QP

[stevie blunder] 30/6/2015 11:39

Mmmm, I wonder if X2 would like to buy out APF's royalty? If they have access to cheap finance it might make sense. Then we could either diversify the royalty base, or return cash to shareholders.

Sorry, just thinking out loud. Ignore me.