Shayne Heffernan Coal Report (NYSE: KOL)

Asia-Pacific mining deals so far this year total $47.6-billion (U.S.), down 23 per cent from a year earlier.

However, activity has picked up in recent weeks, led by a $960-million bid by Thai state-controlled energy company PTT to privatize coal miner Sakari Resources.

Coal, which meets more than half of Asia’s fuel needs, is attracting interest in particular, investment bankers said. Asian countries, led by China and India, need supplies to meet growing power demand.

he 30-stock Market Vectors Coal ETF (NYSE: KOL) paints the picture. Year-to-date, KOL has slid 22.4 percent as waning emerging markets demand and depressed natural gas prices have battered coal equities and prices of the commodity itself.

As a high beta, cyclical sector levered to things such as global steel demand, the coal group usually outperforms to the upside when investors view the global economy through rose-colored glasses. Conversely, the sector’s downside moves can be deep when investors are skittish about the macroeconomic outlook.

Chinese companies are on the prowl in Australia, Indonesia and Canada for beaten down assets, several advisers said, although the country’s leadership transition and uncertainty over the outlook for infrastructure growth were holding some companies back.

“Domestic political change at home is making Chinese investors more cautious. So they’re looking for smaller acquisitions,” said Perth-based Adam Handley, a partner and co-chair of the China Interest Group at law firm Minter Ellison.

In a change of strategy, Chinese firms are less likely now to seek controlling stakes, he said, after running into delays and cost overruns on big iron ore projects they own in Australia, such as on CITIC Pacific’s $8-billion Sino Iron mine.

Lawyers said Chinese companies were particularly interested in coal assets in Indonesia, but are likely to run into competition, including from Russian steel major Severstal and U.S.-based coal investor PHI Group Inc.

Assets on the block in Indonesia include a 20-per-cent stake in PT Asmin Koalindo Tuhup, the coking coal arm of Borneo Lumbung Energi & Metals, in a deal that could be worth $500-million.

South Korean steel maker POSCO and others are already in talks with PT Borneo, which aims to reduce $1-billion in debt incurred last year when it bought a stake in London-listed Bumi Plc.

The Weekly Coal Production Report has been updated for the week ended

September 15, 2012.

For the week ended September 15:

• U.S. coal production totaled approximately 20.2 million short tons (mmst)

• This production estimate is 1.4 percent higher than last week’s estimate and

6.8 percent lower than the production estimate in the comparable week in 2011

• Coal production east of the Mississippi River totaled about 8.2 mmst

• Coal production west of the Mississippi River totaled about 12.0 mmst

• U.S. year-to-date coal production totaled 726.5 mmst, 5.1 percent lower than the

comparable year-to-date coal production in 2011

• All of 2011 production has been revised to match the Mine Safety and Health Administration

(MSHA) final 2011 production. Second quarter 2012 production has been revised to match

MSHA production. These changes are present in the Revisions/Archives section, and are also

reflected in the “Current Weekly Estimates” and “Current Monthly Estimates” tables. These

changes are not reflected in the two Original Estimates tables.

Shayne Heffernan

Shayne Heffernan oversees the management of funds for institutions and high net worth individuals.

Shayne Heffernan holds a Ph.D. in Economics and brings with him over 25 years of trading experience in Asia and hands on experience in Venture Capital, he has been involved in several start ups that have seen market capitalization over $500m and 1 that reached a peak market cap of $15b. He has managed and overseen start ups in Mining, Shipping, Technology and Financial Services.Read the Terms of Service

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