Regency Mines has a significant coal mining interests in the United States. The Rosa coal prospect is metallurgical grade coal used for the production of steel. Below is an abstract from a recent analyst note (see here) regarding Regency Mines coal interests.
The price of metallurgical coal has been rising steadily since 2016.
We now have Trump putting significant tariffs on steel imports (see here). These tariffs for steel can be up to 25%.
What will the impact be on the value of Regency Mines metallurgical coal interests located in the United States? It would be reasonable to assume steel production in the States will increase, increasing the demand for Met coal driving up the cost of Met coal.
Regency Mines in the analyst note they commissioned, stated they expected early profits to come from their Met coal interests.
With the Trump news yesterday you would expect this to be a significant catalyst to:
a) remove barriers, preventing early production of Met coal from happening.
b) increase the early profits RGM are expecting from their coal interests.
It looks like the long awaited returns from Regency Mines coal interests are about to materialise. Trump is turning Regency Mines American coal interests into a ‘gold mine’.
The current Regency mines market cap of £3.5m has no relation to the assets of the business.
Regency have a diverse portfolio of assets covering different commodities and jurisdictions. A portfolio that offers significant opportunities and manages the potential risks associated with businesses that have one business in one area.
The following graphic indicates the diverse nature of the business, its potential and the minimum expected revenue.
The slight delays to the coal projects are just that. A much larger deal is anticipated from that previously envisaged.
We know Legacy Hill have been carrying out due diligence. We will soon know the partners involved in the bigger project deal.
Rumours are circulating that a large coal deal is about to be announced. Longterm Regency shareholders await the news with anticipation.
The share price will react on the coal news and the bashers of the stock will disappear into the either.
We then have the following news coming:
1. Conclusion of the deal from the HHL shares sale to Alba.
2. Mambare Nickel/Cobalt News.
3. Motzfeldt news.
Regency Mines market cap will then IMHO be much higher than the current £3.5m.
The market for metallurgical coal in the United States is increasing predominantly because it is required for steel production.
The following table indicates some key reasons as to why the price of steel is increasing.
With the positives around steel it is hardly surprising we are getting coal companies announcements such as:
- Contura Energy are in the middle of a $162m IPO (see here).
- Warrior Coal have record income of $129.9m in Q2 2017. Warrior’s highly successful second quarter validates their value proposition as the only publicly traded ‘pure-play’ hard coking (metallurgical) coal operator in the U.S. (see here).
U.S Coal global research firm IHS Markit also pointed out that metallurgical coal revival isn’t just dependant on Trump infrastructure projects.
Probably the single biggest driver of the surge in exports is that there is international demand for U.S. metallurgical coal right now. “That is a function of the market rather than the political environment.”
Regency Mining are well placed when production commences to deliver much needed metallurgical coal.
It would appear the recent RGM RNS indicating coal projects are not now going to be progressed piecemeal but the ‘big picture’ route taken is based on some solid foundations..