New Hope looks for coal acquisitions

OREANDA-NEWS. Australian coal producer New Hope is on the lookout for acquisitions despite reporting a first-half loss of A\$23.1mn (\$18.2mn) for August-January because of a A\$58.5mn impairment charge on its oil assets.

New Hope wants to take advantage of the weak coal market and those looking to exit their coal assets to build its portfolio of operating mines and long-term growth projects. Several of the larger multi-national coal mining firms have signalled their intention to sell Australian mines and development projects, including Anglo Coal and Rio Tinto. Some smaller producers may be forced to sell assets if weaker prices persist.

There is still a disconnect between what firms are prepared to sell their coal assets for and what buyers are willing to pay, with few asset sales making it through a full due diligence process. But this year could see more mines sold, as companies rework their long-term coal price forecasts and buyer and seller asset valuations become more closely aligned.

"Market conditions for Australian coal producers are challenging at present. However New Hope has efficient operations and is in a robust financial position, so we are well placed to see out the current downturn and take advantage of these conditions to grow the business for the future," New Hope managing director Shane Stephan said.

Stephan admits that the short-term outlook for global coal markets is challenging, but he is beginning to see positive signs in some markets.

Newcastle prices fell back to close to five-year lows last week of \$58.73/t fob for high-grade 6,000 kcal/kg NAR coal compared with \$74.28/t a year ago. Lower grade 5,500 kcal/kg NAR coal fell to \$51.23/t fob Newcastle from \$61.96/t a year ago. New Hope predicts that its average realised price will be lower during February-July than it was in August-January, although this will be partially offset by a weaker Australian dollar.

New Hope still made an underlying profit, not including its oil asset impairments, of A\$34.2mn for August-January despite the weaker prices. This was a 51pc improvement on the year-earlier period, as it continued to reduce production costs and increase coal production and sales.

The company was forced to book A\$58.5mn in impairments against the carrying value its oil and gas investments because of the weaker oil price. New Hope owns 100pc of Australian independent Bridgeport that has onshore exploration permits in the Otway basin in Victoria state. Bridgeport produced 440 b/d in October-December.

New Hope's saleable thermal coal production rose by 6.5pc to 2.87mn t August-January from 2.7mn t against a year earlier.