Morningstar | Positive Land Court Decision Sees New Hope’s Acland Mine Move Closer to Approval
The Queensland Land Court has conditionally recommended approval of the mining lease and environmental authority for New Acland Stage 3. It is a positive step for the mine and no-moat-rated New Hope. The decision validates our recent increase in the expected chance of approval for Stage 3 to 75% from 50%.There are still a few hurdles to clear before Stage 3 proceeds. However, given the positive Land Court decision, we raise the odds of Stage 3 approval to 100%. This boosts our fair value estimate by 6% to AUD 3.50 per share. The shares are down about 10% from recent AUD 4.00 highs and are now close to fairly valued. Factoring in 100% of Stage 3 mainly impacts earnings from fiscal 2021 onwards. Forecast annual earnings average AUD 0.35 per share from fiscal 2021 to fiscal 2023, up 7% from our prior estimates.
The Land Court has set strict conditions on noise given the mine’s proximity to its neighbours. New Hope is to amend its mining lease applications to include the tougher noise limits. The mine will also be subject to noise monitoring. This will help New Hope to adjust mining operations to stay in compliance.
With the Land Court’s conditional recommendation now in hand, four key hurdles remain to be cleared. First, the coordinator general will need to agree to the new noise limits. Second, the mine needs a water licence and a positive decision on intergenerational equity, which relates to groundwater. Third, the environmental approval needs to be signed off by the department. The final step is mining lease from the minister with the company hoping to have it by mid-2019. We rate rejection of current application only a small chance now. However, if it is, New Hope would likely submit a new application for Acland Stage 3. Assuming a two-year delay with first production from 2023, and an additional AUD 100 million in costs, our fair value estimate would fall to AUD 3.00 per share.
New Hope operates four reportable segments: Coal mining in Queensland (including mining related exploration, development, production, processing, transportation, port operations and marketing); Coal mining in New South Wales (including mining production, processing, transportation and marketing); Oil and gas (including oil and gas related exploration, development, production and processing); and Treasury and investments (including cash, held to maturity investments and available for sale financial assets).
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