Here are two more stocks I’d be delighted to find in my Christmas stocking. What I’m looking for in my Christmas stocks is a bit of excitement in 2025 in terms of price growth: I don’t need to see blue-ship stocks in my stocking, but companies where there is a bit of a story behind the valuation, and where I can see the way clear for some price appreciation that might give me a bit of above-market return.
- Coronado Global Resources (CRN, 87.5 cents)
Market capitalisation: $1.3 billion
12-month total return: –53.9%
Three-year total return: –6.2% a year
Estimated FY25 (December) dividend yield: 2% fully franked (grossed-up, 2.9%)
Estimated FY25 (December) price/earnings (P/E) ratio: 15 times earnings
Analysts’ consensus target price: $1.398 (Stock Doctor/Refinitiv, ten analysts); $1.39 (FN Arena, five analysts)
Steelmaking (metallurgical, also called “coking”) coal specialist Coronado Global Resources mines and exports metallurgical and thermal coal from the US states of Virginia and West Virginia, and from its Bowen basin mining complex in Queensland, and supplies to steelmaking customers located in the Americas, Europe and Asia. CRN is one of the largest met coal producers globally by export volume, serving customers on five continents.
Coronado just brought out a third-quarter report that disappointed analysts, with quite a few target price downgrades. I’m not greatly concerned about that – there was very wet weather in Queensland, and we know that the company is having problems with its conveyor at the Curragh open-cut coal mine in Central Queensland – but I’m reasonably positive on the met coal (hard coking coal, or HCC) price, and Coronado looks nice and cheap.
In that poor third quarter, CRN reported US$608.2 million in revenue for Q3 FY24, down 9.7% from the previous quarter and part of a year-to-date (nine months) revenue total of US$1.95 billion – which was 11.8% lower than the same period in 2023. The revenue fall reflects weaker market conditions, driven by a 10.6% slide in the PLV HCC FOB AUS coal index and a drop in US domestic contract pricing. (The Premium Low-Volatile Hard Coking Coal Free On Board Australia index is a benchmark price index for high-quality, low-volatility hard metallurgical coal exported from Australia.)
Australian saleable production fell 15.4% in the quarter, to 2.3 million tonnes, but US production increased by 8.7%, to 1.6 million tonnes. Australian sales volume fell 10.5%, to 2.4 million tonnes, but US sales volume rose 11.7%, to 1.5 million tonnes. All up, that meant saleable production slid 6.9%, to 3.8 million tonnes, while sales volume declined 3%, to 3.9 million tonnes. Of that, 81% was met coal, and 19% was thermal (electricity) coal.
September quarter average mining costs per tonne sold for the company were 29.2% higher at $117.7 per tonne following geological, mechanical and weather impacts at Curragh that impacted production. That flowed into a reduction in Coronado’s guidance for saleable coal production for 2024 (year to December) from a range of 16.4 million tonnes–17.2 million tonnes to a range of 15.4 million tonnes–16 million tonnes but lifted its average mining cost per tonne sold guidance from a range of US$95–US$99 a tonne to a range of US$105–US$110 a tonne.
The upshot of that is that no-one will be surprised if Coronado slips into a loss this year (there should still be a fully franked dividend) but I would expect it to surge back into the black in 2025. Further out, while the met coal market will probably be broadly balanced from 2024–2026, with increasing India demand being offset by a modest recovery in Australian supply, it looks like a deficit will make itself felt by 2027, given that there has not been the investment in new premium met coal supply in Australia and Canada. The outlook for top-quality steelmaking coal in Asia is still pretty strong – although the price is not going back to 2022 levels anytime soon.
Coronado has shown its confidence in the future with its Mammoth underground coal mine beginning mining this month. Located in the Curragh mining complex, the Mammoth seam was first discovered in the early 1900s but has remained untouched in its underground capacity. Sitting at the southern end of the Curragh North pit, Mammoth will boost Curragh operations: Mammoth is the company’s first foray into underground mining in Australia, and CRN says it underpins the company’s strategy of delivering organic growth to increase production and lower costs. All up, the stocks look to be badly over-sold.
- Bellevue Gold (BGL, $1.215)
Market capitalisation: $1.5 billion
12-month total return: –28.7%
Three-year total return: 12.1% a year
Estimated FY26 (June) dividend yield: no dividend expected
Estimated FY26 (June) price/earnings (P/E) ratio: 9.3 times earnings
Analysts’ consensus target price: $1.90 (Stock Doctor/Refinitiv, seven analysts); $1.713 (FN Arena, four analysts)
Bellevue Gold is developing the underground project of the same name in the northern Goldfields region of Western Australia, which is one of Australia’s highest-grade gold mines, boasting a current mineral resource of 3.2 million ounces at a grade of 9.0 grams per tonne (g/t) of gold, and probable ore reserves (those portions of a mineral resource that have been proved to be viable, both technically and economically, to extract) at 9.32 million tonnes at 5.0 g/t of gold, for 1.51 million ounces of gold, around a core high-grade underground component that stands at 6.83 million tonnes at 6.1g/t, for 1.33 million ounces of gold, enough for an initial mine-life of ten years.
All those numbers have large potential for growth, because the deposit open in all directions. That’s a geological term that means the drilling program literally has not found the limits of the deposit, in any direction, horizontally or vertically.
Discovered in November 2017, the Bellevue operation sped to its first gold in October 2023, with commercial production achieved in May 2024. It was a major achievement: Bellevue Gold found a major high-grade gold resource and brought it into production on time and on budget.
The company sold 93,600 ounces in FY24 (year to 30 June), which enabled it to report a maiden net profit after tax of $75 million for the financial year. Production for the six months to 30 June 2024 was 80,043 ounces, which came in above the midpoint of guidance range, of 75,000 ounces–85,000 ounces. The realised gold price in the June 2024 quarter was $3,393 an ounce, up from $2,998 the previous quarter. Production delivered $41 million of free cash flow. For the first quarter of FY25, gold sales were 39,400 ounces, at an average realised gold price of $3,420 an ounce, at an all-in sustaining cost (AISC) of $1,892 an ounce. (The AISC is a figure that incorporates not only the “cash cost” of production, but all the costs that allow production to be sustained; it indicates break-even.)
To put that in context, the current spot gold price in A$ is $4,176.88. But BGL does not necessarily obtain current pricing, because it hedges some of its gold production by locking-in prices for it: as at 30 September 2024, Bellevue had committed forward hedging of 209,800 ounces of gold, sold at an average hedge price of $2,765 an ounce. That is still a healthy margin, and the hedging (both the gold price and the US$/A$ exchange rate) gives the company more certainty about its cashflow. Each quarter, some production is committed to the hedge ‘book.’
In July this year, Bellevue announced its five-year growth plan, under which production is forecast to increase to 250,000 ounces a year by FY28, significantly growing the earnings and production profile, as costs come down with the increasing throughput. For example, guidance for FY25 is for production of 165,000 ounces–180,000 ounces at an AISC of between $1,750–$1,850 an ounce. BGL expects to hit an annualised rate of about 200,000 ounces by the June 2025 quarter. Then, by FY29, the company is projecting production of 240,000 ounces–260,000 ounces, at an AISC of between $1,500–$1,600 an ounce.
To do this, processing capacity has been staged, with plant upgrades during FY25 and FY26 to take nameplate processing capacity from 1 million tonnes a year to 1.35 million tonnes a year, and then to 1.6 million tonnes a year (with spending estimated at about $40 million in total).
With the five-year plan bedded down, Bellevue will become the only pure-play (that is, only mining gold) 200,000-plus ounces-a-year gold operation with a head grade (the grade of the gold brought to the surface) 5g/t in a Tier 1 mining jurisdiction: the company says Bellevue remains the only project with these characteristics not owned by a global gold major.
In the shorter-term, analysts expect BGL to more than double its FY24 earnings by FY26. According to seven analysts whose estimates are collated by Stock Doctor/Refinitiv, the stock is trading at a price/earnings (P/E) ratio of just 9.3 times expected FY26 earnings – a discount of almost 20% to the average gold industry P/E rating. BGL looks very cheap, and glittering value for Christmas morning.
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