NWH 2.81% $2.93 nrw holdings limited

I was surprised how large NWH's contract mining service is based...

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    I was surprised how large NWH's contract mining service is based on coal. UBS's terse “~50% NWH EBITDA exposure, 2/3 Met, 1/3 Thermal” seems about right (maybe less thermal coal, though). Metallurgical coal covers low volatile pulverised coal injection (PCI) coal and hard coking coal. NWH's contracts are, I think:
    • Dry-hire at Middlemount (Yancoal-Peabody JV) – metallurgical coal
    • Boggabri – thermal coal
    • Barabula (Wonbindi Coal) – metallurgical coal
    • Curragh (Coronado Global Resources) supply metallurgical coal
    • Isaac Plains both types of coal (75% metallurgical).
    There are few practical alternatives in the near-to-middle term for metallurgical coal, but the Chines can source it from elsewhere. Australia produces about half of the world's exported metallurgical coal, and China imports more that half of the world total. Demand and prices fluctuate, exacerbated by China's touchy perception of Australia as a US toady, and ScoMo's proclivity to behave like one.

    China can source metallurgical coal from the US, Canada, Russia, South Africa and a few smaller suppliers. A spat with Australia makes it easier for China to meet Phase 1 commitments of the US-China Trade Agreement to US products – see https://www.spglobal.com/platts/en/...to-buy-more-us-met-coal-in-phase-1-trade-deal.

    NWH should be able to wind back its exposure to coal gracefully, and deploy future CAPEX and team building into areas like civil infrastructure, copper and nickel (the two future-looking metals that are part of the fossil fuel replacement push that is killing off thermal coal. I won't lose too much sleep over the coal threat – it could be a blessing in disguise.

    If Australia moves towards exporting Direct Reduced Iron (DRI), it would diversify its export market. DRI is porous, rusts quickly, and it may self combust, so it is stabilised as briquettes when still hot to get Hot Briquette Iron (HBI). DRI/HBI a merchant product – read about it at https://hannans.com/reports/120964-990304-Increasing-iron-role.pdf.

    DRI/HBI as part of the unfolding magnetite story, IMO, so what NWH loses in the coal sector over time, it may gain in magnetite sector. Magnetite briquettes are less inclined to self-combust than pellets, and hence safer to bulk ship and store. Either coal or natural gas can be used in the DRI process, and WA has an existing grid of natural-gas pipelines that would allow DRI/HBI production to be located in many suitable locations where iron ore is mined in WA.

    All forms of beneficiating, using the term loosely, whether it be to the point of producing concentrates, pellets, briquettes, or refined metals like copper, nickel and gold, are opportunities for RCRMT to step up the value train. Also, by widening the market, beneficiation initiatives reduce dependence on China, because worldwide there are hundreds of Electric Arc Furnace mini-mills, and potential mini-mills, that would import DRI/HBI, or other value-augmented merchant products like copper matte, refined copper, nickel matte, refined nickel, nickel sulphate to mention some.

    All the above relates to long-term pie-in-the-sky. This month the Bunburry Outer Ring Road contract is most likely to be announced, hopefully followed by at least another road-building contract within a few months.
 
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