Coal Quality Due Diligence Case Study
Our client required a marketability report for a coal asset it was reviewing for investment purposes. Aspects for consideration were the approximate price the coal would receive in export markets, which markets were able to accept the coal on a quality parameter basis, and which markets have growing demand profiles and would therefore be seeking new supply sources.
Based on the respective coal quality, we were able to assess the price relativity it would achieve in the market compared to key benchmarks. We were also able to clearly outline which potential export markets would consider purchasing the coal for utilisation, based on the coal quality, the level of competition and the demand growth forecast in each market to 2030. Competitive supply growth from other regions was also considered.
A full coal quality assessment was conducted based on key quality parameters compared to benchmarks and tolerances for each key import market. The favourable and unfavourable aspects of the product were clearly identified, along with a price estimation. Technical and marketing suggestions were provided to optimise the favourable aspects of the coal and minimise the less favourable aspects.
From the demand side, bottom-up forecasts to 2030 were made for each country based on our proprietary datasets/model and converted into an opportunity matrix for this particular coal. In addition, the coal quality import restrictions for each country were also identified. Finally, the risk of competitive supply was assessed by a mine-level export forecast from key regions to 2030.
Our report was utilised to develop a marketing strategy for the project based on the market opportunities identified, including the coal quality aspects that required considering for each market, and the most optimal markets to target. The price forecasts from the report fed into the client’s financial model to assess the project, which was then revied at the board for a final investment decision.