Bisichi Share Discussion Threads

[tim000] 11/7/2022 08:40

Emanuel Datt argues that miners’ P/E ratios should reset at some point, based on fundamentals. We know that there is tremendous latent investor appetite for the next hot commodity: cobalt, graphite, lithium etc etc have all had their day in the sun. I’m pretty sure thermal coal will be this year’s in-fashion commodity; at some point news will spread across social media and everyone will be buying coal stocks. The re-rate is likely to overshoot in the short term. But given the cashflow being generated by miners, a highish p/e implies a tremendous increase in prices. Datt said current margins were akin to those of software companies. I remain non-plussed that O&G investors remain on the sidelines.

[tim000] 10/7/2022 22:29

No, nothing on that. But Eskom do buy a lot of their coal on fixed contracts, as you infer. There has been media commentary on this helping to explain relatively low inflation in South Africa currently.
Reading old Annual Reports, they included much more detail on operations than in recent years. I hope they will be a little more forthcoming now that they have a great story to tell.

[e43] 10/7/2022 22:23

Tim,did you get any insights fr the AGM, regarding breakdown of domestic coal sales,ie ,do they have fixed contract"s with power generator's etc.

[tim000] 10/7/2022 18:08

If (and it is an if) the price of South African domestic coal sales has risen markedly this year, and if BISI has been nimble selling its exports into the thermal market, then we might see a significant reduction in the discount in 2022, including in the first six months. I have assumed the aggregate discount increases from 63% in 2021 to 70% in 2022, more than fully reflecting weakness in domestic prices. Were the discount to stabilise in 2022 at its 2021 level, for example, additional net cashflow to BISI would be about £14-15 mn for the year as a whole. So the assumed discount is obviously critical to the projections of cashflow. But there are some grounds for thinking we could have absolutely stellar results.

[tim000] 10/7/2022 17:56

hxxps://www.spglobal.com/commodityinsights/en/market-insights/latest-news/coal/030322-robust-european-demand-pushes-richards-bay-5500-kcalkg-nar-coal-to-premium

South African 5500kcal/kg began trading at a premium to API-4 RBCT benchmark 6000kcal/kg in March, owing to increased European demand for non-Russian thermal coal. (As I understand it, 6000kcal/kg API-4 coal is a coking coal grade.) I assume BW mines both types of coal, indeed the 39% discount BW realised in 2021 on its exports relative to the API-4 benchmark more or less confirms that. If this is correct, we can hope that the exports price discount to the benchmark has shrunk markedly since March, as more of our coal is sold into the thermal market. (I think this also explains the growing percentage differential between Newcastle thermal and RBCT API-4 benchmarks I've mentioned before.)

[tim000] 10/7/2022 11:55

It's not just that the cost is crippling: supply can be regulated/switched off for political reasons. Germany is now discovering that to its cost, with no obvious short-term solution. My ex-employer the Bank of England was at the forefront of the climate change/globalist/free trade/deindustrialisation/open borders/pro-EU/wokeist agenda, especially under Carney; this ideology has swept across the West and has emboldened Russia and China. And there are seemingly very few if any UK politicians standing up to these vested interests. They all embrace charlatans like Bill Gates, Greta Thunberg, etc, hoping to share in their fame and influence. It's depressing!

[e43] 10/7/2022 11:35

The chicken's are coming home to roost for all virtue signalling western nations ,sadly living in a virtual reality world where they believe continual 'hot air' will produce a miracle energy transition,without looking at the raw numbers.
The failure to invest in proper energy and food security and many other basics,has left European nations with potentially crippling import bills with ever weakening currencies.

[tim000] 10/7/2022 10:41

There’s a good article on the Daily Sceptics website destroying Neil Ferguson’s covid model. Worth reading to see how corrupt the West has become. Personally, I think exactly the same story applies to the climate change fraud: rent-seeking, untalented middle-class nobodies sucking on the teets of US billionaires who decided long ago to invest heavily in wind and solar, and needed to corrupt governments, media and academia for the plot to pay off. Look at what’s going on in Holland, and how the government wants to destroy its own farming industry. This all ties in with what Datt was saying: no one will invest in thermal coal even though it’s the most sought-after product in Europe at the moment. All we can do as investors is say “thank you very much” and pile in. Dividend yields are going to be extraordinary in the next few years.

[tim000] 10/7/2022 10:30

You can find Emanuel Datt giving three stock tips in a Motley Fool article on the web. He’s an international investor. I think he holds Apple for example. He chose three NSW thermal coal miners! I too hold all three. I’m becoming a coal junkie, addicted to buying more.

[e43] 10/7/2022 08:44

Thanks for the Datt interview Tim,very well reasoned ,and summed up the compelling financial case for thermal coal for the foreseeable future.

[tim000] 09/7/2022 06:17

There’s a very good interview of an Australian fund manager, and why he’s heavily buying thermal coal miners. Worth watching. Google Datt Capital Talk Ya Book.

[tim000] 08/7/2022 07:45

Current spot & futures benchmark RBCT export prices (in sterling, not dollars):

2022 Q2 230
2022 Q3 288
2022 Q4 266
2023 Q1 243
2023 Q2 213
2023 Q3 194
2023 Q4 180

Unit operations costs in 2022 should be about £36. Apply your own best guess on the discount rate to benchmark prices. Then multiply by about 1.45 (mn tonnes annual sales)

[tim000] 06/7/2022 09:03

Interesting article about South African miners wanting private investment in Transnet.

[tim000] 06/7/2022 08:57

BEN is barely selling any coal yet, and may need more finance until it reaches profitability. It sells met coal, prices of which have fallen below thermal prices. And yet its mkt cap is 4x that of BISI! Despite the BEN share price falling by over 50%! BISI is worth at least as much as BEN on any rational analysis. No doubt relative share prices will adjust in due course.

[tim000] 06/7/2022 08:50

Pretty much all trades have been buys in the last few days. Perhaps there is a sell order being worked? One of my ASX-listed coal miners, a met coal miner, has made a wise decision to pivot away from met coal customers to the European thermal market. Met coal prices are cyclical and currently weakening; thermal is in structural deficit globally and prices should remain above met prices for some time. And Europe's need for thermal coal is desperate. BISI produces a range of coal products, one of which I believe is met coal. I wonder whether they are supplying that coal to the European thermal market? (BEN would be wise to follow suit.)

[tim000] 04/7/2022 23:12

Newcastle coal futures prices up about 5% today, I guess RBCT prices will follow. Should be a good night for Aussie miners.

[tim000] 04/7/2022 23:09

I’m guessing the regulators would frown upon that - LAP owning shares in BISI who own shares in LAP! I think it’s better if BISI own some holdings in larger coal miners etc and return any further cash to shareholders via dividends. They could pay as much as £2.50 this year if they can’t find any internal growth projects to invest in.

[bisiboy] 04/7/2022 22:47

Here’s an idea
Understand why bisichi can’t by own shares due to family shareholding but what about buying some las with the spare cash

[8gggggggg] 04/7/2022 06:55

Thank you both for your informed contributions., Dakas

[e43] 03/7/2022 23:37

Yes,a changed world since that largely pie in the sky unrealistic get together in Glasgow last November.

[tim000] 03/7/2022 23:17

Of course until recently Europe was delighted that South Africa was exporting less coal, it had just agreed to pay South Africa to run down coal mining. Now the opposite is the case, Europe will be happy to pay South Africa to export more! It seems all the guff about climate change wasn’t even believed by its fiercest advocates. e43, not just about a better balanced domestic market, I’d love BISI to be exporting say half its production at prices of US$200/t.

[e43] 03/7/2022 23:04

Yes ,in many ways the rail issue the last piece in the Jigsaw for BISI,ie firmer domestic SA coal prices on larger export volume.

[tim000] 03/7/2022 22:44

Politicians like to keep inter-government discussions secret. However, surely the EU has been in touch with South Africa to see how it can help overcome logistical problems getting thermal coal out of the country? My understanding is that the main problem now is a lack of functioning trains due to parts shortages. Surely Germany and France can ship trains and parts to South Africa in no time? I believe Europe still has a lot of coal power plants that can substitute for Russian oil and gas.

[tim000] 03/7/2022 22:12

Another point is that sitting on the cash might make the company vulnerable to a takeover by LAP. Distributing much of the cash to shareholders, and in doing so hiking the share price, solves that problem. A higher share price of course also benefits the option holders. It is reassuring that there has not yet been any announcement about the company buying backing unissued options.