how do you value coal assets?
To anyone working in an energy / natural resources group...
How does one value a coal mine? The only method I can think of are precedent transactions, where (agg value / tons of annual production) and (agg val / tons of proven reserves) can be applied as multiples.
What are the other considerations in valuing a coal asset? How does particulate (ash, sodium, etc.) matter come into play? What types of basic info do you need to run a DCF (e.g. volume coal sold, pricing, overhead costs, etc.... how do those fit into deriving capex and working capital assumptions)?
Any input would be greatly appreciated.





coal companies valuations
coal companies valuations are driven by major assumptions around volumes, pricing, costs.
allow the operating data to drive your model and work from there. obviously better quality coal goes for a premium (ex. met coal over steam coal within CAPP)
Capp steam around $65
Met around $80- obv can go up or down whether its high/low vol
PRB at $15
i personally hate DCFs and would just build a model to EBITDA and back into EV/EBITDA multiples across different companies to see how they are being valued by the public equity market (cheap or rich relative to peers)
i dont really think precedent transaction is a good measure as the big publically traded coal players haven't done any huge transactions as of late and buying a company is clearly a different ballgame than buying coal assets in the ground.
hope that helps.
Correct (but missing a small point)
Also, as with any mine, you need to take into account that there is a finite amount of coal in the mine. This means you don't put a perpetuity on the end of your DCF, instead you do an annuity to take into account the number of years remaining.
At the end of the day, if its serious at all you will be made to do a mine by mine, type by type model, they are a pain.
--There are stupid questions, so think first.
Financial Modeling Training
Banking Resume