Glencore, New Hope, and Whitehaven: Valuations Up Modestly on Higher Coal Prices

We raise our fair value estimates for no-moat-rated coal miners Glencore, New Hope, and Whitehaven after updating our assumed near-term thermal and metallurgical coal prices. Our updated fair value estimates also incorporate our latest foreign exchange rate assumptions along with higher coal royalty rates imposed by the New South Wales government. New South Wales will scrap the cap on domestic thermal coal prices effective July 1, 2024, which will be replaced with a 2.6% increase in state coal royalties from that date. However, higher royalties are more than offset by improved near-term thermal and metallurgical coal prices and weaker exchange rates versus the U.S. dollar. Our fair value estimate for Glencore increases by 4% to GBP 530 per share and Whitehaven by 3% to AUD 9.80 per share. Our New Hope forecasts already incorporated the new royalty assumptions; however, we increased our New Hope fair value estimate by 3% to AUD 6.30 per share given higher near-term thermal coal prices and the lower AUD/USD exchange rate.