Geo Energy Resources Ltd: Navigating Coal Market Volatility with Cost-Efficient Expansion

KGI Securities, March 25, 2025

Infrastructure Expansion and Cost Efficiency

Geo Energy’s US\$150 million investment in the MBJ Integrated Infrastructure Project is on track for completion by the first half of 2026. The project includes a 92km hauling road and jetty, which will reduce transportation costs by over US\$10 per tonne and double production capacity to 25 million tonnes per year. Additionally, third-party leasing of the infrastructure is expected to create additional revenue streams, enhancing long-term cash flow and profitability.

Resilient Performance Amid Market Volatility

Despite lower ICI4 coal prices, Geo Energy achieved FY24 revenue of US\$401.9 million and net profit of US\$37.3 million, maintaining a competitive cash profit per tonne of US\$10.37. With no major debt burden and a strong balance sheet, the company remains well-positioned for future growth.

Strategic Growth via Acquisitions and Investments

The acquisition of PT Golden Eagle Energy expands Geo Energy’s reserves and production capacity, securing long-term supply. A US\$35 million investment from ResInvest increased its stake to 6.8%, while a US\$50 million-US\$100 million investment in MBJ infrastructure is expected to further support the company’s long-term expansion plans.

Favorable Market Outlook

Global coal demand is projected to reach 8.9 billion tonnes by 2027, with China’s record coal imports of 542.7 million tonnes in 2024, a 14.4% year-over-year increase, sustaining market stability. Although prices have moderated, thermal coal remains above 2019 levels, ensuring profitability for producers like Geo Energy.

Strong Growth Outlook for FY25

Geo Energy is targeting coal sales of 10.5-11.5 million tonnes in FY25, marking a 33%-46% increase year-over-year, supported by higher expected sales from the TRA mine expansion, improved logistics efficiency from the MBJ infrastructure, and potential upside from coal price stabilization at US\$50-US\$53 per tonne.

Valuation and Recommendation

KGI Securities maintains an OUTPERFORM rating on Geo Energy with a revised target price of S\$0.64, reflecting adjustments to coal production figures. The company’s resilient business model, cost leadership, and expansion plans position it as an attractive investment in the coal sector amid sustained China-driven coal demand and stable long-term pricing trends.