Anglo Pacific Share Discussion Threads

[quepassa] 21/5/2015 09:01

SB.

Re Post 7259

Very good and well considered post. Very interesting. Thank you.-I have voted your post up.


An important part of the equation to be considered is which are the main importing countries of Australian coal. It may surprise some readers.

It is clear that forecasts are that coal will continue to be used but there will be little or no growth in demand for coal whilst the demand for other fuels significantly increases, as we saw in the informative BP and Exxon graphs.

There are many reasons for this including the growing sway of the anti greenhouse-gas lobbies. No-one can deny the extreme weather conditions which scientists now collectively and in unison put down to excessive CO2 emissions.

Many advanced and Westernised countries/economies are increasingly frowning upon the use of coal as an energy source. Now certain parts of the investment communities are more and more expanding their internal Ethical Investing policies to include coal-related investments.

The UK used at one time to be the biggest producer in the world of coal. The UK coal industry is now non-existent as supply comes from elsewhere more cost-effectively from different producers.

India and Africa have abundant coal deposits but they have scarcely been exploited due to various geo-political reasons. But Indian coal has recently woken up fast and surely India will, for example, be able to meet all or most of its own domestic demands going forward.

Seaborne coal ex Australia is severely threatened by the new emerging mines in different continents, just as UK coal was ultimately a fatality. Demand may remain constant for coal but the geographical sources of supply may change enormously - just as we witnessed with the UK. The major miners in Australia are already undergoing massive cost-cutting exercises and are distinctly twitchy about coal. BHP-Billiton has, for example, already hived off its coal interests into a separate entity, South42, as it no longer sees coal as a core activity.

This is perhaps not necessarily an auspicious back-drop for Australian coal.

Turning to the subject of dividends, I hope you are right about APF being a dull dividend payer but my personal thesis is that dividends should rightly come out of income and profits , not self-cannibalisation.

It therefore adds no comfort in my opinion when APF has not revealed, unlike previous years, what their Q1 2015 income is at their largest asset, Kestrel.

Moreover it should be noted that last year's final dividend which becomes only payable in August this year was not recorded ( if my understanding is correct) as a liability on the relevant 2014 accounts. They will apparently be paying last year's dividend out of this year's income.

APF needs to diversify away from coal in my opinion - which is what I thought they said they wanted to do. So, for me at least, the doubling-up of its bet on Australian coal via the recent Narrabri acquisition was for me surprising, although it may serve partly to mask/defray any actual and potential reduction in Kestrel income.

I see APF differently. Primarily as a somewhat risky play on Australian coal - but with considerable added risk elements due to the anti-fossil fuel lobbies, the emergence of new competing mines elsewhere, limited growth prospects and depressed prices.

A fascinating debate. Thanks for your excellent contribution.

Wishing you good luck in your investments.





ALL IMO. DYOR.

QP

[neilyb675] 20/5/2015 15:21

Stevie - good post, unlike that utter moron QP, who holds no stock but talks his own book.

[stevie blunder] 20/5/2015 13:13

QP, you have a point about coal, it is out of favour in rich countries, just look at how shale gas in the US has hammered the thermal coal market.

However such price reductions do have the effect of improving the attractiveness of coal in developing countries like India or in Africa. A rich person who rejects coal also prices in a poor person who wants to use it.Total use is unlikely to fall. That is also the view of BP and Exon.

China seems to be passing peak thermal coal use, but that is surely due to particulate and SO2 pollution rather than CO2 worries. Other countries will consider the low prices a boon and take up the slack.

Gas seems to be favoured as it is abundant, clean and cheap, but technology may come to the rescue of coal. Do some googling around Advanced Ultra Supercritical Coal Power. It is looking like AUSC coal plant would not be far behind CCGT gas plant, maybe 15% or so in carbon terms.

So getting back to an investment case: where will the price settle? Economic theory says that the price is set by the marginal producer, which is why it is essential to be down the cost curve. With regards to APF we have to worry about 2 distinct segments, thermal and met coal. Both of APF's coal royalty producers are well down their respective cost curves so should be able to make a profit and keep paying the royalty.

However I suspect that coal prices will not return to the dizzy heights of a few years ago, just as I suspect oil prices will not make new highs any time soon. Best guess is a plateau in prices. Capitalism has worked and produced new supply in response to high prices.

But the worlds population is growing and becoming urbanised so there will be steady growth in global commodities for my lifetime at least ( I would expect to check out around 2040)

I see APF as a dull payer which will not cover its dividend this year but should next. Growth will have to wait.

All the best

SB

[neilyb675] 20/5/2015 09:39

I LOVE COAL

[quepassa] 20/5/2015 09:36

Good spot about SSE closing Ferrybridge.

Link to the announcement below but this caught my eye as stated in the official SSE announcement:-

"Costs at the 48-year old power station have been rising due to its age and environmental legislation. and it is forecast to lose over £100m over the next five years. This financial situation, combined with THE POLITICAL CONCENSUS THAT COLE HAS A LIMITED ROLE IN THE FUTURE, means that keeping the station open is not sustainable"





ALL IMO. DYOR.
QP

[rcturner2] 20/5/2015 09:04

The interview with the head of SSE on radio 4 was interesting as he specifically mentioned the CO2 taxes as driving the decision.

[rcturner2] 20/5/2015 08:07

SSE announced today that they are closing 1 of their 2 coal fired power stations and moving to gas. Their only remaining coal fired power plant will be reviewed later this year.

[rcturner2] 19/5/2015 13:47

chris, China's overall coal consumption is falling. Nothing to do with the price, they consumed less coal in 2014 than in 2013.

[neilyb675] 19/5/2015 13:44

COAL, lovely stuff. Put it on your fire at home, or let the big industries use it. Essential.

[christh] 19/5/2015 13:38

Coal is not falling because the Chinese all of a sudden have become ethically conscious or interested about the planet!
Its because the produce their own but still not sufficient or related to its economy.
Again coal is commodity and commodities go through a cycle.
China can not do without coal as their power Generators or their furnaces
need to burn coal to produce the goods.
Its the cheapest method for their economy to produce energy.

[quepassa] 19/5/2015 13:36

Good post RCTurner.

Everyone has seen pictures of the filthy smog in certain Chinese cities on TV. The Chinese are indeed doing something about it, as RCT correctly points out.

The other significant challenge is that seaborne coal from Australia is nowadays fundamentally absurd. Oil is burnt in cargo ships to transport coal big distances across the oceans to India? Crazy.

India has vast natural supplies of coal and they are developingg their own pits. This will further decimate over time the fundamental need for Australian coal to be shipped.

Australian seaborne coal is facing many perilous challenges. And APF rather than diversifying, have just doubled up their bet on Aussie coal by buying the Narrabri royalty from a domestic Australian investor who decided to pull out.

ALL IMO. DYOR.
QP

[neilyb675] 19/5/2015 13:20

You can't vote for this post twice.

[rcturner2] 19/5/2015 13:18

Chris, why is China's use of coal dropping then?

[christh] 19/5/2015 12:58

Man will buy the cheapest to survive or fit its budget.
It will buy coal because its the cheapest source available and widely available
in the planet.
If you think China or India or other big industrial nations can afford to buy expensive Nuclear Generators or Solar power energy to provide enough power to
supply factories,offices,houses then you are mistaken.
At the end of the day cost is the main factor not the morals or ethics.

[gavapentin] 19/5/2015 12:43

QP makes a valid point about the Universities BUT remember they have to (at least) portray a good example being academic/philanthropic institutions.

As far as I am aware, "man" as a species has been a greedy b*stard for the past 3 million years (for the sake of argument) and especially so in the last 10,000 years, so I doubt that will change overnight and (unfortunately perhaps for the planet), coal will keep paying money whilst there is no cheaper alternative

[neilyb675] 19/5/2015 12:13

You can't disapprove of this message twice.

[quepassa] 19/5/2015 12:06

when I look at your last post and read the first 8 lines, I do wonder whether your penultimate paragraph isn't rather an unintended self-reflection.

in case it has escaped your notice, in early 2011 APF was 360p and today it is a quid. If you think that this is demonstrative of a share price which is going "up and up", you may need to seek urgent psychiatric attention.

ALL IMO. DYOR.
QP


ps. for djgrant - your musing about repetitious posts in light of 7243 is somewhat amusing, amusing, amusing.

[quepassa] 19/5/2015 10:51

Well, let's see who now further follows in the steps of the Church of England, Stanford University, Oxford and Cambridge, amongst others.

The phenomenon about snowballs is that they rapidly gather MOMENTUM/SPEED as well as MASS once they start moving.

I don't think one can compare the now accepted global recognition of the urgent need to combat CO2 emissions and climate change to your parochial village-hall hustings about Trident.


ALL IMO. DYOR.
QP


ps. - No-one has yet proffered any explanation for APF not providing Q1 2015 income figures for its largest asset, Kestrel this year. As you are long, can you please?

[ian davenport] 19/5/2015 10:37

QP - no , I don't miss the point, its just that snowball still has quite some way to go before it gets to the 38 degree slope where gravity takes over.
Having been to a local hustings where the Green candidate suggested that the solution to stopping Trident was to "significantly increase conventional forces with the money saved" , I'm not yet too worried that there has been much joined up thinking done to the alternatives of many aspects of current economic life that some elements of society argue against.

as it is, I have DMOR, am long , and wrong - but its less wrong now than a month ago

[djgrantb] 19/5/2015 10:26

QuePassa Hombre, despite your constant negativity against Anglo Pacific the share price seems to be recovering from its lows, keep up the good work, but please don't keep repeating yourself, yourself, yourself ?

[quepassa] 19/5/2015 10:01

you surely miss the point.

it's a rolling snow-ball effect.

ask yourself if there may be a link between the Church of England's recent public decision to cut coal investments and what Oxford and Cambridge Universities are so soon thereafter contemplating.

You may wish to re-read post 7197, of which this is an extract:-

"The Green lobbies are certainly in ascendancy and are now influencing some very powerful and important investors who in turn will be spreading the word."

and indeed post 7199.

ALL IMO. DYOR.
QP

[ian davenport] 19/5/2015 09:50

whilst i appreciate both CofE and Oxford university have intellectual and moral weight, they have total funds of £9 bio and £1.7 bio respectively (say $16-17 bio in total) - Blackrock had $4.7 Trillion ,so i don't think them divesting coal ( and it sounds specifically tar sands) investments that will knock the sector that much