BNNHF - Coal Stocks On The Rise As Demand For Steel Soars In 2024
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Although there hasbeen a global push towards cleaner energy sources, coal still remainsa vital part of our energy mix. In fact, a recent report by theInternational Energy Agency found that global coal demand hit anall-time high in 2022 amid the energy crisis, far outpacing theprevious record set in 2013. According to the U.S. Department ofEnergy, coal accounted for about 20% of the country's electricityproduction as of October of last year, highlighting thecommodity's significance in maintaining grid stability.
Despite the fact thatthe coal industry has grappled with major headwinds like a string ofcoal companies going bankrupt, the broader coal industry had animpressive year in 2023, with coal stocks collectively gaining about40% in the year, further reaffirming the resilience of the commodity.That was thanks to a renewed focus on metallurgical coal, whichexperts agree will continue to experience robust demand going forward,driven by an increase in the demand for steel. For investors lookingfor a way to play this demand, here are some coal stocks that couldoffer exposure to the sector.
Benjamin Hill Mining Corp. (OTCQB: BNNHF)(CSE:BNN), which is currently focused on its Alotta ExplorationProject and Aion Mining Corp.’s Coal Project, has been makingsignificant inroads in its exploration activities.
Hosted in the CanadianYukon, the Alotta project, which is BNN’s flagship project,initiated a diamond drilling program in November last year. Leveragingintricate IP data showing anomalous copper and gold in soil, inaddition to compelling geophysical anomalies, the drill programstrategically targeted the central area of a substantial chargeabilityanomaly spanning over 2 kilometers at the project.
The company selectedArcher Cathro and Associates as the consulting firm to providelogistical, permitting, and drilling services based on the fact thatit has been one of the most prolific explorers in the Yukon for thepast five decades and has been responsible for discovering andadvancing a wide variety of deposits.
The findings of the program didn'tdisappoint, as the results revealed a large, multiphase porphyrysystem at the south-central portion of the induced polarizationchargeability. According to the core samples, the project showedmineralization rich in pyrrhotite, pyrite, chalcopyrite, andmolybdenite, which reaffirmed Alotta’s significant resourcepotential.
Following the success of the diamond drill program at Alotta, Benjamin Hill Mining Corp. (OTCQB:BNNHF) (CSE:BNN) made thestrategic decision to double down on its coal investments. The companyannounced that it had signed a non-binding letter of intent with AionMining Corp. for the acquisition of a 20% interest in Aion and itsfully permitted coal project located in Santander, Colombia. This movenot only reaffirms the company’s commitment to strategicallyexpanding its coal resource footprint but also diversifies itsportfolio of coal projects.
Earlier this month, BNN provided a corporate updateregarding the project, which revealed a number of interesting facts.Both historical and recent drilling programs revealed that the FLG-111concession has eight known seams of metallurgical and thermal coal.CEO Cole McClay noted: “Our strategic investment in Aion MiningCorp. presents a great opportunity to enter the coal industry with aproject that is primed to advance quickly with all required permits,exciting exploration discoveries, and a highly skilled multi-nationaltechnical and operations team.”
With permits already granted to Aion for theextraction of up to 180,000 tons of coal per year, the project is setto advance rapidly. Right now, the focus is on quickly developing theinfrastructure following the acquisition of an additional 24-hectaresof land to provide surface access rights and, at the same time, themobilization of large equipment for advanced site preparation andsurface works.
Thanks to taking the stake in Aion, Benjamin Hill MiningCorp. (OTCQB:BNNHF) (CSE:BNN) is positioning itself to become oneof the key players in the resurging global coal market, a move thatcould ultimately unlock significant shareholder value in the future.
AlphaMetallurgical Resources, Inc. (NYSE: AMR) needs no introduction tomost energy investors based on the fact that it is one of the largestcoal stocks globally. The Tennessee-based miner, whose operations aremainly concentrated in Tennessee, boasts high-quality reserves andspecializes in supplying metallurgical products to the steel industry.Its portfolio also includes highly productive and cost-competitivecoal mines across the Central Appalachian coal basin.
The company isAmerica's largest producer of coking coal, producing about 20% oftotal 2022 production. In FY2022, Alpha Metallurgical produced 16.1million tons of coal and had over 300 million tons of reserves.Roughly 70% of the company’s coal output is exported, which ties inwell with the fact that it owns 65% of the DTA (Dominion TerminalAssociates) export terminal, which is capable of loading up to 6,500tons per year.
AMR recently reported its third-quarter earnings, which had anumber of interesting highlights. Although the company reported anadjusted EBITDA of $154 million, down from $258 million in the secondquarter, it achieved a significant milestone by closing its lastremaining thermal mine, Slabcamp, making it a pure-play metallurgicalproducer. The company also continued its share buyback program in abid to further increase shareholder value. Since January 2022, AMR hasbought back 28% of its stock, making it one of the most aggressivebuyback programs on the market across all sectors and industries.Going forward, the company has increased its share repurchase programauthorization by $300 million to a total of $1.5 billion, allowing forapproximately $560 million in additional repurchases.
Looking ahead to 2024,the company provided guidance, anticipating shipping between 15.5 and16.5 million tons of metallurgical coal.
Alabama-based Warrior Met Coal, Inc.(NYSE: HCC) is a metallurgical coal producer with a strong focuson export sales. It has two active mines that have the capacity toproduce 8 million short tons of metallurgical coal per year. Warrioralso has the Blue Creek development project, which produces coal withlow sulfur and strong coking properties similar to its premiumhard-coking coal produced in Australia. While the company is already ahighly profitable coal producer, the Blue Creek mine will be a majorcatalyst for the company once it is fully developed.
Warrior recentlyreported third quarter earnings, revealing it had sold approximately2.3 million short tons of metallurgical coal, a significantyear-over-year increase on the backdrop of better rail and terminalavailability. This brought in about $417 million in revenue for thequarter, which translated to a pre-tax income of $102 million and anet profit in excess of $85 million for an EPS of $1.64 pershare.
Thecompany’s balance sheet remained robust as it generated $456 millionin cash flow, closing the quarter with roughly $687 million in cash.That means that the anticipated $350 million capex to be spent on BlueCreek this year should be fully covered by the company's cash.Warrior Met Coal will have deployed almost $500 million on thedevelopment of Blue Creek by the end of the year, which should put iton track for initial production by then.
The company revised its capex guidanceupwards to $820–830 million to include the development of BlueCreek’s longwall section in order to boost the production rate to9.6 million short tons per year, which should be reached by the end of2026.
ColonialCoal International Corp. (TSX-V: CAD) is a pure-play metallurgicalcoal developer with a 100% interest in two resource-stage coalproperties in the Peace River Coalfield of northeastern BritishColumbia, Canada: namely, the Huguenot and Flatbed properties. TheHuguenot property boasts 189 million metric tons of combined measuredand indicated resources, plus 194 million metric tons of inferredresources of hard coking coal, while about 298 million metric tons ofinferred metallurgical coal resources have been delineated at Flatbed.In the company’s recent annual general meeting held in December, anumber of key decisions were made, including:
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The re-election of David Austin, Ian Downie, Anthony Hammond,John Perry, Gregory Waller, and Partha S. Bhattacharyya as directorsof the corporation for the year 2024.
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PricewaterhouseCoopers LLP, CharteredProfessional Accountants, were re-appointed as the company’s auditorfollowing board approval, and the directors were authorized to set theauditor’s compensation.
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Shareholders approved the continuation of thecorporation’s current share optionplan.
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