Monsters of Rock: Dividends fly for punters in met coal stocks

Stanmore to pay out $115 million in final dividend after beating production guidance
Queensland miner says Eagle Downs S32 acquisition targets long term hard coking coal demand
Dalrymple Bay Infrastructure delivers solid profit and dividend on rising coal exports

Stanmore Coal (ASX:SMR) will put $115 million in the pockets of shareholders in the form of a US8.4c full year dividend, lifting the lid on plans to diversify its coal grade offerings through its cut price acquisition of South32’s (ASX:S32) Eagle Downs project in Queensland.

Stanmore has flagged it plans to ramp up production of higher grade met coals, with much of its output at its South Walker Creek, Poitrel and Isaac Plains mines currently sold into the discounted semi-soft and PCI coal markets.

PCI prices have sunk into deep discounts against the premium hard coking coal index with a flood of Russian supply heading into markets in India and South-East Asia.

Premium hard coking coal has on the other hand been trading over US$100/t above historical averages for several months — fetching US$310/t — thanks to tightness in exports out of Queensland, where wet weather and labour shortages have hit producers like BHP (ASX:BHP) hard.

According to its accounts today, Stanmore sold 13.1Mt of coal in 2023, beating guidance on saleable production, posting underlying EBITDA of US$1.1 billion and finishing the year in a US$126m net cash position despite lining shareholders’ pockets with a US$5.82c special dividend late last year after it emerged the miner would not be successful in acquiring BHP’s Daunia and Blackwater mines.

It instead offered US$15m to acquire South32’s 50% stake in the stalled Eagle Downs project in the Bowen Basin, with another US$20m due to be paid after 100,000t of longwall mined coal has been produced and US$100m in further price-linked royalties.

SMR, which will also assume a royalty payable to Vale, is also keen to purchase an additional 30% stake from Chinese steel giant Baowu.

Stanmore boss Marcelo Matos says tight supply and rising Asian steel demand had were positive for the long-term hard coking coal outlook.

“Projected growth in demand will require increased supply for seaborne met coal, of course especially from Australia,” he said today.

“Stanmore’s operating portfolio and future development is in step with these projections, with development opportunities, like Lancewood and Eagle Downs providing potential increased exposure to the hard coking coal market.

“Of course, growth in supply remains subject to sufficient investment supporting the development of new mines as well as consideration of the logistics network and a challenging regulatory environment in Australia.”

SMR has also approved plans to expand South Walker Creek from ROM production levels of 8Mtpa to 9.4Mtpa, with targeted saleable production capacity of 7Mtpa to be hit by early 2025.

Stanmore Coal (ASX:SMR) share price today

Dalrymple Bay in coal divvie splash

Also throwing dividends from Queensland’s coal sector is port operator Dalrymple Bay Infrastructure (ASX:DBI), which facilitated the shipment of 61.1Mt of coal in FY23, up from 53.3Mt a year earlier.

71% of that was met coal, with higher terminal infrastructure charges in the second half also helping drive a slight lift in revenue from $623.8m in 2022 to $642.2m in 2023.

EBITDA fell from $267.8m to $261.3m, with lower tax receipts helping lift NPAT from $69m to $73.9m.

DBI will pay out 5.375c a share for the fourth quarter, bringing its 2023 shareholder returns to 20.8c.

Located south of Mackay, the Hay Point port shipped 77% of its exports to Japan, South Korea, India, South East Asia and Europe, with 5.8Mt sent to China in 2023, up from 0 a year earlier, and Vietnamese exports more than doubling to 5.1Mt.

“The increase in the Terminal Infrastructure Charge for TY-23/24 reflects our robust access pricing framework and the ability of our business to navigate and prosper amongst inflationary pressures,” DBI acting CEO Stephanie Commons said.

“Our access pricing framework provides significant cash flow certainty for our business which allows DBI to plan with confidence over the medium to longer term as we implement our organic growth projects and pursue our transition strategy.

“With the Dalrymple Bay Terminal positioned as critical link in the global steel making supply chain, our robust balance sheet and our predictable earnings stream, DBI remains well positioned to continue to deliver stable returns for our shareholders.”

The materials and energy sectors were weighed down by a poor day for the bulks, led by drops across the iron ore, oil and coal space, but battery metals and gold producers had a strong run, propping the materials sector to a 0.37% loss.