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 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.
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