Looking for free options on Met Coal

[sculpin]

One is Maxim Power's (TSX - MXG) 18 million tonne approved met coal mine. Referenced here...http://www.cornerofberkshireandfairfax.ca/forum/investment-ideas/mxg-maxim-power-corp/msg276183/?topicseen#msg276183. Also see below...

 

The other is the various Marret funds holdings in Cline Mining - referenced here.....http://www.cornerofberkshireandfairfax.ca/forum/general-discussion/multibagger-speculative-ideas/msg272274/#msg272274. MHY.UN on the TSX is trading at $0.04 with a listed NAVPU (September 29, 2016): $0.727. Obviously the market  does not believe Cline is worth anywhere near what Marret believes it is - with met coal now > $200/tonne an interesting speculation?

The Private Portfolio consists of equity and bonds issued by Cline Mining Inc. (“Cline”). Cline holds various mineral assets, including the New Elk Coal Mine

in Colorado, which has almost 630 million tonnes of in-place coal.

 

Any others?

 

 

Zero value attributed to Maxim's 100% ownership of Summit Coal makes it a potential valuable option in Met Coal - prices having spiked to $210US/tonne from $70/tonne in 2015. Believe the mining equipment purchased in the last 5 years still is stored there....

 

Pg 22 http://www.maximpowercorp.com/_html/investor_centre/documents/ShareholderPresentation2-Jun-16.pdf

 

Summit Coal Limited Partnership ("SUMMIT")

 

SUMMIT is MAXIM's development initiative located north of Grande Cache, Alberta that owns metallurgical coal leases for Mine 14 ("M14") and Mine 16S ("M16S"). Current estimates for M14 are 18.9 million tonnes of low-mid volatile metallurgical coal reserves with a mine life of 17 years based on the NI 43-101 Technical Report filed on SEDAR on March 21, 2013. M16S is located 30 kilometers northwest of M14 and represents 1,792 hectares or 29% of SUMMIT's total area of coal leases. A NI 43-101 Technical Report has not been prepared for M16S.

 

M14 is permitted for a run-of-mine production rate of up to 1,300,000 tonnes per year. MAXIM has also received approval from the Alberta Energy Regulator to construct and operate a Coal Beneficiation Plant. This Coal Beneficiation Plant, to be located on MAXIM's existing M1 industrial complex, will bifurcate M14's run-of-mine coal into an estimated annual production of 950,000 tonnes of high-quality, low-mid volatile and metallurgical coal for shipment to export markets. These approvals provide SUMMIT with all of the requisite government and regulatory approvals to construct and operate M14. In November 2014, MAXIM received delivery of five pieces of mine equipment including two continuous miners and three shuttle cars. The units are in storage awaiting development of M14.

 

 

$1 Coal Mines Become Jackpots After Prices Surge

 

September 29, 2016 — 5:00 PM EDT Updated on September 30, 2016 — 12:26 AM EDT

 

Vale, Sumitomo sold met coal mine to Stanmore Coal last year

 

Metallurgical coal prices have more than doubled this year

 

Buying bargain-bin coal mines amid the worst commodity slump in a generation has turned into a savvy bet as prices of the fuel surge.

Stanmore Coal Ltd. bought the Isaac Plains metallurgical coal mine in Australia for A$1 in July 2015 from Brazilian miner Vale SA and Japan’s Sumitomo Corp. when the price of met coal, used to make steel, averaged the lowest in about a decade and just three years after the mine was valued at A$860 million ($659 million). One year later, spot prices have soared above $200 a metric ton as China’s steel mills crank out record volumes while its mines slow production.

 

"It seems like we did get our timing right in this instance," Stanmore Chief Executive Officer Nick Jorss said in a phone interview from Sydney. "When we bought Isaac Plains, hard coking coal was in the $70s. We’ve had pretty substantial movement since then."

 

Coking coal has surged almost 170 percent this year as output from China, the world’s biggest miner, tumbles under pressure from the government to cut overcapacity even as demand from steelmakers surges. Prices reached $210.80 a ton as of Thursday, according to The Steel Index.

 

Stanmore, which has seen its share price double since the beginning of last month, isn’t the only miner who bought low. Australia’s TerraCom Ltd. last week completed the purchase of the Blair Athol thermal coal mine, also for A$1, from Rio Tinto Group as the world’s second-biggest miner exits some of its Australian coal portfolio. Thermal coal in Australia, while unable to match coking coal’s rally, has risen more than 50 percent this year.

 

‘Brave Enough’

 

Miners who struck deals before the recent price surge were well placed to profit from the unexpected revival, even if they’re small producers, said Robin Griffin, research director for global metallurgical coal markets at Wood Mackenzie Ltd., a consultant.

"They were brave enough to make the call to try and make it work," Griffin said. "They wouldn’t have foreseen this spike, but they would have had a more optimistic view perhaps. So, in some respects, you could argue their gut feeling was justified."

While the $1 headline price appears a bargain, Griffin notes the deals come with costly commitments. Stanmore is responsible for a $32 million obligation for the Isaac Plains mine, in Queensland state, while TerraCom is also on the hook for costs related to rehabilitating the mine.

 

Quarterly Contracts

 

Stanmore is targeting 1.1 million metric tons of coal a year from Isaac Plains, while TerraCom hopes to ship 2 million tons annually. Australia, the world’s largest coking coal producer, exported 186 million tons last year, according to Wood Mackenzie.

Japan’s Electric Power Development Co., which owned Blair Athol with Rio Tinto and is known as J-Power, said it decided to sell its stake to a company that was willing to recover the remaining coal resources, according to a J-Power spokesman, who asked not to be named, citing company policy. Sumitomo Corp., Rio Tinto and Vale declined to comment.

Stanmore’s Jorss expects coking coal contract prices for the fourth quarter to rise above $150 a ton, from the current quarter’s $92.50. Analysts at Macquarie Group Ltd. forecast deals will be agreed at $170 a ton, which is still far short of the record of $330 a ton in 2011.

“If they have material to sell, the funds will just roar in this quarter,” Wood Mackenzie’s Griffin said. “If prices continue into the next quarter and into the first quarter of 2017, it will look like a master stroke."

TerraCom Chairman Cameron McRae, a former Rio Tinto executive, said there were good bargains to be found in unwanted coal assets.

"The extent of the commodity down-cycle has put a lot of miners under pressure and you’ve seen companies sell up because their balance sheets require it," McRae said. "When you see a significant down-cycle you will always see assets come onto the market."

 

http://www.bloomberg.com/news/articles/2016-09-29/-1-coal-mines-turn-to-jackpots-as-china-s-cuts-power-price-rally

 

 

 

[bskptkl]

TCK offers a reasonably priced option on met coal price. A price around $18 assumes a $130/t met coal price I had heard, but I haven't confirmed it. I have a small position that used to be much larger and severely underwater down around $7. I also bought a small position in BHP recently. So that is how I recently went long met coal.

 

I still have a lot of MHY.UN - one of the best ideas I've traded in the last 2 years. Thanks again Sculpin for pointing it out! I don't anticipate the Cline mine ever working out though, but I have seen crazier things in met coal world.

 

 

[bskptkl]

A better (than MHY.UN) way to bet on Cline is MAR which has .43 of NAV concentrated in the debt of energy companies (which has performed well recently) and .45 of NAV in Cline all for the low low price of .35. So get paid to own Cline...

[sculpin]

A better (than MHY.UN) way to bet on Cline is MAR which has .43 of NAV concentrated in the debt of energy companies (which has performed well recently) and .45 of NAV in Cline all for the low low price of .35. So get paid to own Cline...

 

Yes that is the safer way to play the potential of Cline. Hopefully Marret can do something with Cline - I can't imagine how they've been allowed to maintain such a large value in their NAV when the market has been saying it is essentially worthless for years now. Perhaps we get an answer sooner rather than later now that met coal is around $200 - from their most recent quarterly....

 

Cline Mining Update

There have been no material events in the liquidation of Cline.  The commodity environment has improved slowly

as metallurgical coal has recovered to above $100 per tonne from the lows of just below $80.  Chinese growth is

still  a  wild  card  but  the  US  Dollar  has  stabilized  and  has  only  traded  sideways  for the  last  few  quarters. 

 

The Manager believes that if metallurgical coal rises to the $120-125 level, the sales environment for this asset would

likely improve.

 

And....

Cline’s  focus  remains  on  improving  liquidity  through  the  sale  of  non-core  assets  and  the  reduction  of  expenses.  During  the  period,  the  company  entered 

into an agreement to sell Cline Gold, which is expected to close in July 2016. The company has lowered headcount and further reduced its burn rate at the

New Elk Mine. As the mine remains on “care and maintenance,” Cline management continues to sell used equipment into a challenging market. Sales of

equipment and the non-core assets are being undertaken with an aim to maximize corporate liquidity until a buyer for the asset can be secured.

[sculpin]

Coal has been one of the best performing commodities this year. Spot price of Australian coking coal, used to make steel, has surged to $US213.40 a tonne, according to the Steel Index, a data provider. That is double the price it sold for in mid-August, and almost triple its price at the beginning of 2016.

 

Thermal coal, burned for electricity, has also rallied, and Australian prices are trading up almost 70 per cent on the start of the year.

 

Prices have climbed because of cuts to production in China, which has traditionally produced much of the coal it needs for its steel mills and power plants. That has sparked a buying frenzy in the international market.

 

China’s coal imports surged to 20 million tonnes in August, up 48 per cent year-on-year, according to the latest available data from the general administration of Customs.

[Cardboard]

What I find amazing about met coal is that we have all heard for a few years now as to how much glut there was mainly due to a very large number of mines that had been enlarged or started up in Australia. The price kept on dropping all the way to the $70's/ton in November until it rallied recently above $200/ton due to China production cuts.

 

It is a crazy move when you look at that based on a small change in supply and mines that will still start in Australia.

 

Now, imagine what would happen to the price of oil if Venezuela production slowed down dramatically due to civil war, strike or their continued inability to pay their bills?

 

Cardboard

[valcont]

What I find amazing about met coal is that we have all heard for a few years now as to how much glut there was mainly due to a very large number of mines that had been enlarged or started up in Australia. The price kept on dropping all the way to the $70's/ton in November until it rallied recently above $200/ton due to China production cuts.

 

It is a crazy move when you look at that based on a small change in supply and mines that will still start in Australia.

 

Now, imagine what would happen to the price of oil if Venezuela production slowed down dramatically due to civil war, strike or their continued inability to pay their bills?

 

Cardboard

 

Good point. I am not a conspiracy theorist but I feel there is a concerted effort to keep the oil price down. If you look at the EIA inventory report, destabilizing middle east, worsening relations with Russia,they all point to a move up in the oil prices but the focus is almost always on the weakening demand (even that hasn't materialized). 

[sculpin]

Six small Canadian companies with takeover potential

 

SHIRLEY WON

Special to The Globe and Mail

Published Friday, Oct. 07, 2016 5:00AM EDT

 

 

The pick: Maxim Power Corp. (MXG-TSX)

Close at press time: $3.15 a share

52-week range: $2.34 to $3.32 a share

David Barr, PenderFund Capital Management Ltd., Vancouver

 

Shares of this Calgary-based independent power producer have struggled but are now attractive as a liquidation play, says Mr. Barr. Maxim, of which insiders own a sizable chunk of shares, operates power plants in Alberta, the United States and France. In 2012, it announced a strategic review to maximize the value of its foreign units, but regulatory problems scuttled a deal to sell its U.S. assets. Maxim chairman Bruce Chernoff, a major shareholder who was appointed interim CEO last summer, is now “probably highly motivated to sell the assets and wind it up,” Mr. Barr said. Last month, Maxim struck a deal to sell its French assets. Recently, Maxim agreed to a deal with a U.S. energy regulator that could pave the way for a buyer, he added. “We think the company trades at a substantial discount to what the company could sell its assets for. We think Maxim is worth about $5 a share.”

http://www.theglobeandmail.com/globe-investor/six-small-canadian-companies-with-takeover-potential/article32264654/

[sculpin]

http://seekingalpha.com/article/4011448-maxim-power-liquidation-final-innings

 

 

Valuation

 

Current EV of $240m CAD - $60m debt, $180m equity.

 

France Sale - $70m CAD

 

USA Sale - $220m - $290m CAD (after $10m CAD FERC fine)

 

Canadian Business - $0m

 

Summit Coal - $0m

 

Alberta LLS Restitution - $40m to $50m Canadian

 

EV based on Sale Proceeds: C$330m to C$410m

 

Less Debt of C$60m

 

Total Equity Value: C$270m to C$350m

 

Per Share: C$5.00 to C$6.50

*Note: Sale prices of the US and French businesses would be somewhat in excess of book value, and so would incur some capital gains taxes, but would be mostly shielded by $15m in unrecognized capital loss DTAs. Maxim also hasoperating loss DTAs in excess of >$100m.

 

...While maintaining the optionality of the Canadian businesses being worth >$0.

 

$55m CAD in additional value would increase Maxim's per share liquidation value by C$1.

[sculpin]

http://www.bloomberg.com/news/articles/2016-10-12/nippon-steel-said-to-agree-to-highest-met-coal-price-in-4-years

 

Fourth-quarter supply contract said to be settled at $200/ton

Spot prices almost tripled this year amid China output cuts

 

Peabody Energy Corp. has scored the highest contract for selling metallurgical coal in four years after China’s effort to trim its coal output helped spot prices nearly triple this year.

[sculpin]

A better (than MHY.UN) way to bet on Cline is MAR which has .43 of NAV concentrated in the debt of energy companies (which has performed well recently) and .45 of NAV in Cline all for the low low price of .35. So get paid to own Cline...

 

Q3 update from Marrett on Cline...

Cline Mining Update

 

Last quarter  met  coal  prices  had  moved  back  up  above  $100/tonne  and  the  market  was  improving.  Due  to

environmental policies in China, these prices have now moved above $200/tonne and several shut in mines are

exploring  re-opening.  Should  prices  stay  above  $150/tonne  for  a  reasonable  period,  the  salability  of  Cline

increases significantly.

[misterkrusty]

could somebody please explain to me what exactly are the interests in Cline for MHY.UN and MAR?  do they both hold equity?  if so, what is the % ownership of each?  if either of them hold debt, what exactly do they own?

 

does MHY.UN still own anything aside from its interest in Cline? 

thx

[sculpin]

could somebody please explain to me what exactly are the interests in Cline for MHY.UN and MAR?  do they both hold equity?  if so, what is the % ownership of each?  if either of them hold debt, what exactly do they own?

 

does MHY.UN still own anything aside from its interest in Cline? 

thx

 

MHY has no other assets of any value than that of Cline. Here is how I understand the holdings in Cline...

 

MAR & MHY own both debt and the equity of Cline - these funds & 2 others managed by Marret for Ont Teachers essentially own 100% of the equity in Cline through both voting & non voting shares. No value in MAR or MHY is given to this equity & the current NAV represents the holdings in the 2022 zero coupon.

 

The equity...

 

TORONTO (July 17, 2015) – This press release is being disseminated by Marret Asset

Management Inc. (the “Manager”), on behalf of certain accounts managed by it, at the address of

200 King Street West, Suite 1902, Toronto, ON M5H 3T4, as required by National Instrument

62-103 – The Early Warning System and Related Take-Over Bids and Insider Reporting Issues.

On July 8, 2015, shares of Cline Mining Corporation (“Cline”) were received by certain accounts

managed by the Manager, as disclosed below, pursuant to a Companies' Creditors Arrangement

Act (Canada) plan of compromise and arrangement. The Accounts held certain debentures of

Cline which, following the recapitalization of Cline, were exchanged for shares and additional

debt (the “CCAA Plan”). The accounts did not provide any additional consideration to Cline as

part of the CCAA Plan and the shares were issued as part of a compromise of debt of Cline.

The following accounts managed by the Manager received securities directly in Cline, as set out

below:

Account # of voting/non-voting

common shares

% of class

Marret High Yield Strategies Fund 6,878,247 non-voting 72.95%

Marret Private Portfolio HY Trust 1,065,513 non-voting 11.30%

Marret Resource Corp. 2,075,595 voting 48.05%

As of the date hereof, the Manager has control and direction over accounts, including the above

listed accounts, which, in aggregate, hold 4,319,306 voting common shares and 9,428,299 nonvoting

common shares of Cline, being 100% of the voting common shares and 100% of the nonvoting

common shares of the Cline. Immediately prior to the CCAA Plan, the accounts did not

hold any equity securities of Cline.

 

 

The debt in MAR....

 

7,651,048 Cline Mining Corp., Zero Coupon, 2022/07/08 7,651,048 7,324,005

652,776 Cline Mining Corp., Zero Coupon, 2022/07/08 652,776 624,873

 

The Cline debt in MHY...

 

25,269,869 Cline Mining Corp., Floating Rate, 2022/07/08 25,269,869 24,189,708

2,247,916 Cline Mining Corp., Floating Rate, 2022/07/08 2,247,916 2,151,829

 

The restructure process here...

 

http://cfcanada.fticonsulting.com/cline/default.htm

 

Cline Sedar...

 

http://www.sedar.com/DisplayCompanyDocuments.do?lang=EN&issuerNo=00007621

 

 

[Guest cherzeca]

there is an interesting opportunity in mongolian mining, mmc 975 hong kong and moglf otc. govt moving towards approval to built a railroad from chinese border to mongolian coaking coal deposits, and mmc might be part of consortium to develop massive tt mine. 

[JayGatsby]

Civeo (CVEO) is one I'm in that has an interesting, but not free, option on met coal. They provide workforce accommodations (mancamp hotels) for Canadian oil sands (northern Alberta) and Australian met coal (Bowen Basin). Currently doing ~$90M of EBITDA with $365M of debt and $120M of market cap. EBITDA currently split ~60/40 Canada/Australia. I'd previously assigned little option value to Australia but now it seems to have potential. On the call today they said they haven't really seen any new activity out of Australia yet. Probably need oil sands to come back at least modestly to really hit a home run. There's risk that they lose some contracts or renew at lower rates but they've been deleveraging nicely with a 2019 maturity.

 

The dynamic is interesting of i) China not funding cash-negative operations, ii) an industry that has seen little capex for the last few year, and iii) basically inelastic demand. Curious to see what happens with aluminum and oil over the next few years.

[sculpin]

http://www.bloomberg.com/news/articles/2016-11-09/coal-resurgent-renewables-in-retreat-energy-after-trump-s-win

 

Coal Resurgent, Renewables in Retreat After Trump Win

 

If you want a snapshot of what the global energy map will look like under President Donald Trump, look no farther than the stock market.

Glencore Plc, the world’s top coal trader, surged more than 5 percent on Wednesday. Vestas Wind Systems A/S, the world’s biggest wind-turbine maker, plunged as much as 13 percent. The swing foretells a story of fossil fuels making a comeback, while the fight against climate change -- and investment in wind and solar power -- languishes.

In his only major energy policy speech ahead of the elections, Trump said that he would rescind “job-destroying” environmental regulations within 100 days of taking office and cancel the climate deal reached last year in Paris.

 

“A Trump administration will focus on real environmental challenges, not the phony ones we’ve been looking at,” Trump told supporters in May in North Dakota, the birth-place of the U.S. shale revolution.

 

To be sure, Trump has offered few clues on how he plans to implement his plans. Energy and climate policy has taken a back-seat to immigration, the economy and debate about the candidate’s fitness for office. And some of his proposals are contradictory, like his pledge to boost both natural gas and coal, two fuels that compete against each other in the power generation market.

 

Yet, few doubt who’s likely to win and lose, particularly as Trump can rely on supportive lawmakers in Congress to push his agenda.

"The result is undoubtedly a blow for the renewable energy industry," said Matt Loffman, an analyst at energy consultant Douglas-Westwood in Houston. "The historic election result is perhaps welcome news for a hydrocarbon industry that has been on the ropes for over two years."

 

 

Coal prices already are enjoying a renaissance after China, the world’s largest consumer, cut domestic production, forcing power plants to buy overseas. The cost of thermal coal in the Australian port of Newcastle, a benchmark for Asia, has more than doubled since January to a four-year high of $114.75 a ton.

Shares of big coal miners such as Anglo American Plc, BHP Billiton Plc and Rio Tinto Plc rose between 2 percent and 4 percent on Wednesday. Wind turbine makers Gamesa Corp. Tecnologica SA and Nordex SE fell.

 

As coal enjoys a comeback, the biggest loser could be fight against climate change. Under President Barack Obama, the U.S. rescued a two-decade old process the United Nations promoted to rein in pollution, forging a climate change deal last December. Along with China and more than 190 other countries, the so-called Paris agreement accord set out a framework for all nations to cut emissions.

 

It would be difficult but not impossible for Trump to pull out of the Paris accord. While the Senate never voted on the Paris deal, it’s part of the 1992 UN Framework Convention on Climate Change, which the U.S. ratified under Republican President George H.W. Bush. Trump would have to renounce the 1992 treaty and risk bringing down the entire UN process to scrap Paris. The U.S. would have to give three year’s notice to withdraw from Paris.

But Trump doesn’t need to cancel Paris to derail the process, effectively hampering the growth of renewable energy, analysts and campaigners said.

Yukari Takamura, a professor at Nagoya University in Japan who has followed climate change talks for more than a decade, said the Obama administration took a lead that contributed "enormously" to the Paris deal. "Lack of such leadership might slow down the progress" by unsettling the investors who need to fund renewable developments, she said.

 

As Trump shapes his energy agenda, the first clue about his priorities could come with his selection for secretary of energy. Obama surrounded himself with policy experts and academics such as Steven Chu and Ernest Moniz. Trump has relied so far on the advice of Harold Hamm, the founder and chief executive officer of Continental Resources Inc., one’s of America’s largest shale oil producers.

 

Whoever his choice as energy secretary, the global fossil fuels industry, which over the last four years has been on the defensive, is likely to find a friend in the White House.

"The oil and gas industry is a clear winner with the new president," said Alexandre Andlauer, head of oil at research firm Alphavalue in Paris. “U.S. Oil companies have a better future today than yesterday.”

[Guest cherzeca]

fwiw increased my arch a bit.  a huge debt restructuring and a huge political victory should provide legs for arch....

[sculpin]

Coal price inflation could last years

 

http://www.valuewalk.com/2016/11/coal-price-inflation/

 

Jefferies believes coal price upside could last years because China introduced the production caps to save its regional banks reeling from high exposure to a weak and fragmented domestic coal industry. China’s total debt exposure to coal could exceed three trillion yuan, with a third of it coming from banks.

 

Game-Changing Coal Price Inflation

 

China stands to gain from higher coal prices in other ways too. In theory, the inflation is a positive for its economy that has excessive debt, and coal shortages might be part of ongoing supply-side reforms that help eliminate inefficient capacity in other industries, including steel, Jefferies said.

 

The Asian giant is the world’s largest producer and consumer of coal, accounting for half of global consumption, nearly two-thirds of it for electricity.

[sculpin]

Maxim Power Confirms Sale And Liquidation

Nov 11, 2016 7:58 AM

 

http://seekingalpha.com/instablog/44534176-leefarnam/4932544-maxim-power-confirms-sale-liquidation

 

TSX:MXG

 

OTC:MXGFF

 

With it's Q3 release,

 

"STRATEGIC REVIEW

 

Following the agreement to sell COMAX, the Corporation commenced consideration of various strategic and financing alternatives potentially available to MAXIM in relation to its investments in the United States and Canada. MAXIM currently owns and operates 446 MW of generating capacity in the United States and 156 MW of generating capacity in Canada. MAXIM also has permitted power generation development projects totalling up to 996 MW (refer to Growth Initiatives section below) and a permitted metallurgical coal development project in Alberta. MAXIM will provide updates as these considerations progress."

 

Maxim also confirmed it's base estimated proceeds from the Line Loss Provision settlement with the Alberta Energy System Operator as $42m. Interest, penalties, and legal fees will increase this amount.

 

"ALBERTA UTILITIES COMMISSION ("AUC") LOSS FACTOR DECISION

 

On September 28, 2016 the AUC asserted its position through Decision 790-D04-2016 (the "Decision") on several preliminary matters related to remedy under Module C of Milner Power Inc.'s ("Milner") complaint relating to the Alberta Electric System Operator ("AESO") Line Loss Rule. The Decision confirmed, among other things, that the AUC's proceedings will establish compensation to Milner that will include an interest provision at the Bank of Canada Bank Rate plus one and one half percent, and that parties will not be compensated for their cost of participating in the proceedings. MAXIM's internal calculations are that overpayments of $41.8 million were made by Milner to the AESO over the period from January 1, 2006 to September 30, 2016. In recognition of the possibility of delays in determining the final remedy to Milner, Milner applied to the AUC on November 9, 2016 for interim relief. As at the date of this press release, the implementation date of the new rule under Module B and the amount and timing of compensation under Module C cannot be determined."

 

As noted in my SA Article on Maxim,

I originally estimated liquidation proceeds to shareholders to be between $5 and $6.50 CAD per share.

However, since that time some incremental changes to the thesis have occured, namely:

 

Trump

 

- Weakening of the CAD vs the USD. Since the overwhelming asset value of the company is in USD, this provides incremental support to the estimated proceeds. Further weakening may push ultimate CAD proceeds to shareholders above the estimated range.

- Surge in coal (met and coking) prices from reduced Chinese supply as the government curtails the most inefficient and polluting mines as well as what a Trump Monarchy may mean for North American coal demand. From a low of under $80 USD/ton last year, metallurgical coal is now selling for upwards of $200USD/ton. The value of Summit Coal, Maxim's permitted and shovel ready metallurgical coal mine, was previously valued at $0. It is now increasingly likely this mine is worth substantially more than $0.

 

- The Alberta Government has proposed 400 MW of immediate green energy project tendering, with 3000 MW up to 2030 to be added. As a reminder, Maxim owns prime wind generation land in Alberta's Southeast with wind energy potential up to 200 MW. I previously valued this at 0 but now anticipate incremental value from obtaining a contract and then selling to an investor looking for regulated returns (Berkshire, CPPIB, etc.).

 

As a reminder, every $55m in additional value adds $1 per share in value to Maxim's liquidation value.

 

All in all, Maxim's thesis continues to proceed on track, with proceeds likely at the higher end, if not in excess of, my previously estimated range.

[sculpin]

According to Metal Bulletin, the Q1/17 coking coal benchmark price has been settled at $285/t FOB DBCT. The participants to the settlement were Nippon Steel and Sumitomo Metal on the steel production side, and Glencore and Teck on the mining side.

 

We view this as positive - the settlement price of $285/t is $10/t higher than our recent forecast of $275/t for the quarter.

 

Updating our metallurgical coal forecasts.  With the Q1 benchmark now settled, we are updating our coking coal price forecasts for 2017.  We are now forecasting an average annual price of $214/tonne (from $158/tonne).  We maintain our belief that the price will correct downwards in the second half of the year, though not as aggressively as we had previously forecasted.

[sculpin]

Should help keep coal pricing elevated...

 

North Korea is China’s fourth-biggest supplier of coal. Although China announced last April that it would ban North Korean coal imports to comply with United Nations sanctions, it made exceptions for deliveries intended for the “people’s well-being” and not connected to the North’s missile programs.

 

In practice, that exception was the cover for coal to continue to flow across the border in huge quantities, with imports of non-lignite coal up 14.5 percent last year to 22.5 million metric tons (24.8 U.S. tons).

 

China suspends North Korean coal imports, striking at regime’s financial lifeline

 

https://www.washingtonpost.com/world/china-suspends-north-koreas-coal-imports-striking-at-regimes-financial-lifeline/2017/02/18/8390b0e6-f5df-11e6-a9b0-ecee7ce475fc_story.html?utm_term=.bfd37e7f4293

 

http://www.reuters.com/article/us-column-russell-coal-coking-idUSKBN1582BY

 

Another factor to consider is Chinese imports of North Korean coal.

 

This is classified as anthracite by customs, but North Korean supplies are largely used as coking coal in steel-making or as a high-quality fuel in other manufacturing, such as ceramics.

[sculpin]

King Coal Begins To Releverage

 

12:29 PM ET

Thomson Reuters

LPC: Coal companies return to U.S. leveraged loan market

By Jonathan Schwarzberg

 

NEW YORK, March 3 (Reuters) - Rising coal prices and a more favorable outlook for the industry under President Donald Trump’s administration are allowing U.S. coal companies to sign new leveraged loans after being shut out of the market since mid-2015, despite a declining long-term outlook for the industry.

 

Massive investor demand for floating rate assets helped St Louis, Missouri-based coal mining and processing company Arch Coal to increase the size of a refinancing loan to US$300m from US$250m on February 23, less than six months after emerging from bankruptcy.

 

“This is probably the strongest leveraged loan market since before the credit crisis,” a banker said.

 

Coal has fallen out of favor as a fuel source in the United States in the last few years due to environmental concerns and the sector was hit by multiple bankruptcies amid the commodities and energy slump of 2015 and 2016.

 

“The coal world has gone through some challenging times,” a syndicator said. “However, met coal prices have been in a rally for a number of months now, which is helping to portray that industry in a more positive light,”

 

Metallurgical coal prices climbed more than 50% from March to October in 2016 and have held on to these gains as the U.S. gets ready to increase coal production. Coal carload traffic was up 19.2% in February compared to a year earlier, according to the Association of American Railroads.

 

President Trump has been promising to help strengthen the coal industry since the campaign trail, and a White House official told Reuters Wednesday the president plans to remove a federal coal leasing moratorium as soon as next week.

 

“The regulatory scrutiny of coal has eased since the new administration has taken over, and that has relaxed some of the negative bias as well,” the syndicator said.

 

Although coal companies are anticipating regulatory relief and are getting a better reception in the capital markets, production is continuing to decline and the rise in the price of thermal and coking or ‘met’ coal is failing to increase enough to benefit shareholders or stimulate new investment.

 

MORE DEALS

 

Coal companies, which until recently were viewed as difficult credits, are taking advantage of seemingly insatiable investor appetite and an issuer-friendly market to complete deals, helped by investors’ preference for floating rate debt as U.S. interest rates start to rise.

 

Arch Coal’s new US$300m term loan will refinance existing debt. The company emerged from bankruptcy in October 2016 after eliminating about US$4.8bn in debt. In addition to increasing the loan, Arch Coal was also able to cut the pricing to 400bp over Libor from initial guidance of 450bp.

 

Coal plant owner Homer City Generation was not able to achieve similar pricing for a loan after it filed for bankruptcy on January 11. The company launched a US$150m term loan to collateralize its obligation and fund its debt service reserve account, which priced in line with guidance at 825bp over Libor on February 8.

 

Blackhawk Mining had to increase pricing on a US$66m term loan that refinanced existing debt to 950bp over Libor from guidance in the 800bp-850bp range in early February, but completed the deal.

 

Other coal companies were encouraged by these syndications and headed to the market, including U.S. coal supplier Contura Energy and Alabama coal miner Warrior Met Coal, which both set deadlines of March 9.

 

Contura is arranging a US$400m term loan to refinance debt with proposed pricing of 500bp over Libor and Warrior Met, which is made up of assets from bankrupt Walter Energy, is also lining up a US$350m term loan with guidance of 550bp-575bp to back a dividend payment.

 

Coal companies have not tapped the market since mid-2015. The metals and mining sector ended 2016 with a default rate of 23.6%, according to Fitch Ratings, led by the coal sector. However, a recovery in secondary loan prices and strong investor demand has created the current wave of coal loans.

 

Investors’ hunt for paper and yield as billions of dollars of cash flows into the U.S. leveraged loan market has led them to reconsider deals that would previously have been off limits, despite the coal industry’s negative long-term outlook.

 

“The leveraged loan market has been overrun by such massive inflows of capital that you could probably get a loan to buy a fleet of zeppelins at this point in time,” said Jim Tisch, president and CEO of Loews Corp during his February earnings call.

 

(Additional reporting by Lynn Adler.) (Reporting by Jonathan Schwarzberg; Editing By Tessa Walsh)

 

http://www.economiccalendar.com/2017/03/02/teck-resources-noble-group-optimistic-about-coal-prices/

 

 

[bskptkl]

I've bought MAR back around $0.39 and trimmed MHY.UN at $0.17 just for something to do.

MAR has 45 cents of non Cline NAV and 45 cents of Cline NAV.

MHY has 72 cents of Cline NAV.

MAR has traded up to 50-55 twice in last months, so hoping it can do it again.

 

In re-reading this thread, I noticed a lot of good picks; CVEO and MHY tripled, BHP, TECK, ARCH all had nice gains.

All with coal prices ending lower (with a lot of volatility though): TECK averaged $207 per tonne for coking coal in 4th Q 2016 vs. $170 for 4th Q 2017.

 

 

[bskptkl]

https://web.tmxmoney.com/article.php?newsid=6874281951184801&qm_symbol=MAR

 

Marret to distribute Cline to shareholders and to allow shareholders to elect $0.53 in cash (8 cents or $1.4 million more than hard NAV) - vote to occur in June.

Those are great terms negotiated by management. Consider me impressed.

 

I bet news leakage explains the sharp sell off in MHY.UN last week - went from $0.15 to $0.085.

[Cardboard]

I am not sure that I understand the drop in MHY.UN related to this announcement.

 

Marret Resources owns 15.1% of Cline while it is just over 50% for MHY.UN. Marret Resouces plans to sell its 15.1% stake in Cline and to distribute proceeds to its shareholders.

 

If they sell it for nothing then yes, it would look really bad for MHY.UN. However, there is no indication of what will be realized.

 

So what has changed really regarding how much this met coal mine in Colorado and iron ore mine in Madagascar are worth?

 

Cardboard