Is the party over for small coal stocks?

If you or your portfolio manager is invested in Australian coal prospectors and small miners, chances are you’re suffering more than a guilty conscience right now.

Market Forces has examined the performance of seventeen coal prospecting and mining companies trading in Australia and found a huge drop in their value in the past year. We used data from company filings, stock exchange information and material from Bloomberg to put the information together.

The companies, listed below, had a combined market capitalisation in June, 2011, of just over $6 billion. Today, they are a shadow of their former selves, having seen $1.6 billion in their total value disappear over the past 20 months. That means combined, these companies have managed to shed over $110,000 of worth per hour for the past 20 months.

The share prices tell an unsurprisingly similar story. On average share prices across these companies have fallen over the past year by 47 per cent.

While this overall picture looks pretty shabby for coal prospectors, a few companies deserve particular mention for their dramatic falls from grace:

• MetroCoal and Stanmore Coal, both pursuing new thermal coal projects in Queensland’s Surat Basin, are now worth only 30 per cent  of what they were in June 2011. Their share prices are in an equally sorry state, Stanmore’s only a fifth of what it was a year ago.
• New Hope Coal has managed to shed a cool $800 million in value over the past year and a half.
• Acacia Coal, owner of Bowen Basin tenements, now has a share price of just 2c, after losing three quarters of its value in the past 20 months.

Among the investors most exposed to these market slumps are:

• Perpetual, who bought over 9 million shares in New Hope Coal in May 2012 only to find their value to drop by over a $5 million a few months later.
• Regal Funds Management, who bought 11 million shares in Guildford Coal in March 2012 at 70c, before selling 38 million shares at 60c a few months later.

2012 was a shocking year for coal traders, especially out of Australia. A slowdown in Chinese economic growth saw coal piling up in port stockyards and the price of coal fall to levels that made a lot of Australian mines economically unsustainable.

Much of the current coal prospecting in Australia is predicated on there being a hungry Asian market for coal beyond 2015. But with China now setting a coal consumption cap and uncertainty in India over their plans to increase domestic infrastructure and revise down plans for new coal growth, investing in Australian coal prospectors and small miners is looking far from a safe bet.

Julien Vincent is a campaigner for Market Forces, a volunteer organisations focusing on environmental accountability from investments made by banks and superannuation fund managers.