Down 40% Tuesday, up 21% today, what’s going on with this ASX coal share?

ASX coal miners are holding on for the ride as a new Queensland tax adds to volatility in the sector.

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Scared people on a rollercoaster holding on for dear life, indicating a plummeting share price

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Key points

  • Volatility among ASX coal shares is high as several factors are pushing and pulling the sector 
  • A windfall tax in Queensland is dragging on some coal miners although there are signs the coal price could stay stronger for longer
  • But one company's share price is a standout today as it outperforms its peers following news it's secured funding to fast-track the Burton Mine

ASX coal shares are on a rollercoaster as a new Queensland tax is adding to the volatility brought on by surging coal prices and climate concerns.

But there’s one ASX coal company that’s standing apart from its peers today — that’s Bowen Coking Coal Ltd (ASX: BCB). Its share price rocketed 21.43% to close at 25.5 cents today.

The gain is in contrast to fellow Queensland coal miners that are reeling from the shock news that the Palaszczuk government is hiking coal royalty rates.

ASX coal miners getting burnt in Queensland

The South32 Ltd (ASX: S32) share price tumbled 1.7% to $4.09 while the Whitehaven Coal Ltd (ASX: WHC) share price lost 1.67% to close at $4.70. Both have coal operations in Queensland.

But that is also true for the Bowen Coking with its flagship project in Queensland’s Bowen Basin.

New Hope for the Bowen Coking share price

Having said that, the project is still some way away from shipping its first coal. Bowen Coking announced yesterday that it had secured a US$55 million debt facility to fast-track its Burton Mine.

The facility, provided by Taurus Mining Finance Fund No. 2, will primarily be for the rebuilding of the Burton infrastructure.

Further, the company signed a A$70 million secured performance bonding facility agreement with New Hope Corporation Limited (ASX: NHC), with an additional A$40 million via convertible notes.

The total funding of around A$190 million will enable the ASX small cap miner to complete the acquisition of 90% of the Lenton Joint Venture (JV). The JV owns the Lenton Project and the Burton Mine.

ASX coal miners up in arms

South32 and Whitehaven are less fortunate as they will feel the impact of the royalty hike announced on Tuesday.

Royalties could go up as much as 40% when ASX coal miners receive more than $300 a tonne for their coal.

Coal miners in Queensland have been scathing of the state government’s decision which, they say, was implemented without industry consultation.

Windfall tax rattles industry

The higher royalty regime has three tiers. The first is a 20% tax for prices above $175 a tonne, then 30% above $225 a tonne, and 40% when it’s more than $300 a tonne.

The windfall tax could reap the Queensland government an extra $4.5 billion in the next three months alone if current spot prices are maintained.

ASX oil and gas shares will also be watching nervously. There’s debate about whether they too should be hit with extra taxes due to the surging prices of their commodities.

Is this a bullish sign for coal?

But it isn’t all bad news for coal miners. Last year’s power crisis in China due to a shortage of coal could repeat this year.

The Asian giant is trying to cap coal prices to avoid power blackouts this summer, according to reports by the Australian Financial Review. This is in response to surging demand and a lack of supply.

As we discovered the previous time Beijing tried that, price caps don’t work. If anything, this could be a signal for ASX coal share bulls to keep betting on the sector.

Meantime, Queensland premier Annastacia Palaszczuk will likely be rubbing her hands in glee.

Motley Fool contributor Brendon Lau has positions in South32 Ltd. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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