NHC +5.82%: Shares were strong today after the coal producer announced the acquisition of Malabar Resources, increasing its stake from 24% to full ownership of the Maxwell mine in NSW and accelerating production growth plans.
Key details:
- Approximately A$1.8bn, an all-stock acquisition.
- Expected to lift targeted coal production to around 17Mt by 2028, with potential to reach 19Mt over time.
- Maxwell currently produces high-quality thermal coal, with potential to produce semi-soft coking coal in the future.
We own NHC in our Active Income Portfolio and we like the acquisition, particularly because it creates flexibility to expand metallurgical coal production helping diversify earnings beyond thermal coal. Although dilutive to existing shareholders, the all-share structure of the deal limits the immediate cash burden, while NHC’s stronger balance sheet should offer financing and operating advantages as Maxwell ramps up. The key will be delivering the production growth and capturing the expected synergies, but strategically, it makes sense to us.
MM remains long and bullish NHC
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