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Whitehaven Coal – September 2019 Quarterly Report

Jordan Baird

Jordan Baird is the head ASR Wealth Advisers client services desk and has been with the organisation since 2017. He first started investing in his early years. While he believes that investors should leave no stone unturned he has a particular interest in trading based on broad macroeconomic trends along with specific analysis of innovative up-and-coming companies.

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 Coal - sept report

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).

 


 

Disclaimer:

This article has been prepared by the Australian Stock Report Pty Ltd (AFSL: 301 682. ABN: 94 106 863 978)

(“ASR”). ASR is part of Amalgamated Australian Investment Group Limited (AAIG) (ABN: 81 140 208 288 Level 13, 130 Pitt Street, Sydney NSW 2000).

This article is provided for informational purpose only and does not purport to contain all matters relevant to any particular investment or financial instrument. Any market commentary in this communication is not intended to constitute “research” as defined by applicable regulations. Whilst information published on or accessed via this website is believed to be reliable, as far as permitted by law, we make no representations as to its ongoing availability, accuracy or completeness. Any quotes or prices used herein are current at the time of preparation. This document and its contents are proprietary information and products of our firm and may not be reproduced or otherwise disseminated in whole or in part without our written consent unless required to by judicial or administrative proceeding. The ultimate decision to proceed with any transaction rests solely with you. We are not acting as your advisor in relation to any information contained herein. Any projections are estimates only and may not be realised in the future.

ASR has no position in any of the stocks mentioned.

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