Whitehaven Coal (ASX: WHC) is the largest independent coal producer and the leading coal producer in New South Wales (NSW). Whitehaven currently operates five mines in North West NSW; four open cut mines at Maules Creek, Tarrawonga, Werris Creek and Sunnyside and one underground mine at Narrabri. Whitehaven has a market capitalisation of A$3.24 billion.
Whitehaven has a market capitalisation of A$3.24 billion
What are the main points in the September 2019 quarterly report?
- Managed ROM Coal Production for the September 2019 quarter is 4.4Mt up 22% from the September 2018 quarter.
- Managed Saleable Coal Production for the September 2019 quarter is 4.9Mt, up 23% from the September 2018 quarter.
- Managed Total Coal Sales for the September 2019 quarter is 5.5Mt, up 14% from the September 2018 quarter.
What are the drivers of this result?
Maules Creek Open Cut Mine
Saleable Coal Production was relatively flat with a 3% increase compared with the September 2018 quarter. This slight increase is a reflection of the drawdown of higher opening stock levels to support customer demand.
Narrabri Underground Longwall Mine
The Narrabri Underground Longwall Mine showed significant gains in production this quarter. The mine saleable coal production increased by 147%, compared with the corresponding period. Additionally, ROM coal production increased by 226%, compared with the corresponding period.
The significant increase in ROM, saleable coal production and sales of produced coal over the comparative period reflects good production levels at the mine for the quarter and PCP production being adversely impacted by the scheduled longwall change out from LW107 to LW108.
Gunnedah Open Cut Mines
ROM coal production was down 17% compared with the corresponding period. Saleable Coal Production was down 15 per cent compared with the corresponding period. This result is due to the closure of the Rocglen mine, which saw last ROM coal mined in June 2019, as well as the closure of the Sunnyside mine, which saw last ROM coal mined in August 2019, as both these operations transition into rehabilitation phase.
What is the outlook for Whitehaven?
FY20 guidance for managed ROM coal production is in the range of 22.0 – 23.5Mt and managed coal sales is in the range of 20.0 – 21.0 Mt.
The proposed Vickery Extension open cut mine, with JORC marketable reserves of 178Mt, is progressing through the NSW approvals process. Whitehaven expects to receive project approval early in the calendar year 2020. Additionally, the proposed Winchester South open cut mine, situated in the Bowen Basin Queensland, is progressing through the Queensland Government’s EIS process, with the Final Terms of Reference for the EIS issued on 4 September 2019.
Whitehaven’s management notes thermal coal prices have continued to exhibit weakness due to the impact of ongoing market conditions namely low seaborne LNG prices into Europe and Asia, Chinese import restrictions and the generally negative sentiment on global GDP stemming from the trade tensions between the United States and China.
What is the market reaction?
The initial market reaction to Whitehaven September quarter 2019 report is positive. Whitehaven share price is up around 4.5% cent and is currently trading at around A$3.30 (12.00, 22 October). Whitehaven has a P/E ratio around mid-teens and an annual dividend yield of 8% (partially franked).
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