Broker raises coal concerns as public backlash kills off Bundaberg project
Booming coal prices may not flow through to Queensland producers because of capacity constraints on a crucial rail network.
BHP is selling the Daunia and Blackwater mines (Pic: BHP)
Analysts at RBC Capital said volumes on the central Queensland coal network, which services the Bowen Basin mines, had been hit by rain outages and absenteeism from Covid-19.
The impact was most likely going to be felt by Aurizon, which operates the network.
“Australian exports have been weak, exporting 166 million tonnes in 2021, the lowest since 2012 and the start of calendar year 2022 has seen a continuation of the trend,” RBC said in a note to clients.
“It is worth noting that recent inclement weather in early in 2022 severely affected southeast Queensland and northern NSW, which explains the 19.5 per cent reduction in exports but did not extend to the central Queensland coal network.”
The volumes on CQCN were down 3.6 per cent for the year to the end of February.
The analysts pointed out that Aurizon had take-or-pay contracts which mitigated the issue.
The concerns over the state’s exports came as the State Government killed off a controversial proposal from Fox Resources to explore for coal north of Bundaberg.
In rejecting an application for a mineral development lease, which allows for exploration, Resources Minister Scott Stewart said there was significant adverse community sentiment to the proposal.
“Fox has not adequately demonstrated to me they can resolve or offset the public’s concerns,” Stewart said.
The project was a long way from becoming a mine but the decision will add to the debate about fossil fuel developments.
Although Queensland has problems with coal production, stockbroker Wilsons has tipped Aurizon among a group of stocks that were vulnerable to merger and acquisitions.
It said 20 per cent of the ASX 100 could appear attractive to buyers. In the list it included Aurizon along with Amcor, Ansell, Atlas Arteria, Downer EDI, Medibank Private and Tabcorp.
Wilson said private equity retained large pools of capital and the pandemic had accelerated structural pressures on some companies which was likely to lead to consolidation.
“Despite a record level of activity in 2021, pent-up demand for transactions remains high,” Wilsons said in a research note.
“It may take a reduction in equity and interest rate volatility to subside before we see a pickup in merger and acquisition activity levels, something we believe is likely as we go through 2022.”
