Coalminer expects rich seam of profits

MACARTHUR Coal has raised its profit guidance, giving shareholders more positive news after Canberra's softening of the mining tax increased market interest in coal producers.

By InvestSMART · 7 Jul 2010

By InvestSMART ·
7 Jul 2010

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MACARTHUR Coal has raised its profit guidance, giving shareholders more positive news after Canberra's softening of the mining tax increased market interest in coal producers.

The miner yesterday said it expected to make $115 million to $125 million in profit in 2009-10, $10 million more than it forecast in May, thanks to better-than-expected production.

In 2008-09 it made $168.6 million, helped by higher price agreements signed before the financial crisis struck.

The upgrade is part of a wave of positive news for the industry. Miners have negotiated hefty price rises with Asian buyers for this financial year, and Canberra last week watered down the proposed tax on the industry.

New figures from the Bureau of Statistics showed coal export values were up almost 10 per cent in May to $397 million, leading an export bonanza. A key reason for the surge was higher prices the type of steel-making coal produced by Macarthur almost doubled to $US167 a tonne in the last quarter, up from $US85 a year earlier.

Commodities strategist at ANZ, Mark Pervan, said further price rises were likely next year, with India emerging as a large and growing market.

India's role could mirror China's role in iron ore, where Chinese demand has caused hefty price increases for all customers, Mr Pervan said. "What China has done for iron ore . . . India will do for the coal markets."

Coalminers have also been prominent in recent acquisitions by Asians, further fuelling market interest in the sector. On Monday, Thailand's Banpu offered $2 billion to buy the 80 per cent of Centennial Coal it does not already hold.

Yesterday Macarthur shares rose 0.7 per cent to $12.84.

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Frequently Asked Questions about this Article…

Why did Macarthur Coal raise its profit guidance for 2009–10?

Macarthur Coal upgraded its guidance because production was better than expected. The company now expects to earn $115 million to $125 million in 2009–10, about $10 million more than it forecast in May. The upgrade also came amid industry-wide positive signals such as higher coal prices and a softer proposed mining tax from Canberra.

How much profit is Macarthur Coal expecting in 2009–10 and how does that compare to last year?

Macarthur Coal expects $115 million to $125 million in profit for 2009–10, which is $10 million higher than its May forecast. In 2008–09 the company made $168.6 million, helped by higher price agreements signed before the financial crisis.

What recent changes have there been in coal prices and export values?

New Bureau of Statistics figures showed coal export values were up almost 10% in May to $397 million. The type of steel‑making coal produced by Macarthur almost doubled in price to US$167 a tonne in the last quarter, up from US$85 a tonne a year earlier.

How are Asian buyers and India affecting coal demand and prices?

According to ANZ commodities strategist Mark Pervan, Asian buyers have negotiated hefty price rises this financial year and India is emerging as a large, growing market. Pervan suggested India could play a role for coal similar to what China has done for iron ore, potentially supporting further price increases.

What was the impact of Canberra softening the proposed mining tax on coal producers?

The federal government’s decision to water down the proposed mining tax helped increase market interest in coal producers. That policy move, combined with higher prices and stronger production, contributed to positive news for the industry.

Have there been recent acquisitions in the coal sector that investors should note?

Yes. The article notes growing Asian interest in coal assets—Thailand’s Banpu offered $2 billion to buy the 80% of Centennial Coal it does not already hold, illustrating active merger and acquisition activity in the sector.

How did Macarthur Coal’s share price react to the profit upgrade?

Macarthur Coal shares rose 0.7% to $12.84 following the profit guidance upgrade and the broader positive news in the coal sector.

What key factors should everyday investors watch after this coal industry update?

Based on the article, everyday investors should monitor production results, coal price trends (especially steel‑making coal prices), export value data, government policy such as mining tax changes, and demand from Asian markets including India. These factors helped drive the recent profit upgrade and market interest—but as always, investors should rely on their own research and up‑to‑date information.