Whitehaven Coal (WHC) Update Sept. 21st 2023
This is not a recommendation or proposal to do anything. The data written in this article is not guarranteed. It is my private personal opinion. I own a position of Whitehaven Coal shares that`s why I`m not independing.
Whitehaven operates 4 coal mines in New South Wales and Queensland, Australia.
Actually WHC seems to bid for BHP’s Daunia and Blackwater metallurgical coal mines in Queensland (24).
Chances & Risks
The coal price plunged to 161 US$ (thermal coal) in Q2/23 away from the record coal prices of 380 USD for thermal coal. It generated nearly 0.3 bn USD cash (ex rate 0.68) WHC held a net cash position of 1.7 bn USD (June 30.2023). Putting production costs of 70 USD/ton in account it is still very profitable.
Acc. to (18) the cost of coal production have doubled in the last 6 years and will rise to 103 AUD in 22/23, (70 US$). Saleable production decreased to 13 M tons due to severe weather conditions.
Queensland established a royalty system where companies must pay 20 per cent for prices above $175, 30 per cent for prices above $225 and 40 per cent for prices above $300. The Winchester South project in Queensland got lower priority.
NSW (hosts WHC producing coal mines) has announced a freeze on mining royalty rates. It means that NSW coal mining companies won’t face an increase in rates until at least June 2024 (20).
As the coal demand in Asia seems to remain stable for the years to come - most coal power plants in Asia have an age <20 years - capex spend on coal projects is low in the countries producing seaborne coal due to the green religion and the dogma of "Climate change" - a supply gap for seaborne coal seems to be very likely in the comming years. Acc. to Commodity Insights 2023 the gap will widen as several large mines nearing end of mine-life. The volumes needed to meet demand will no longer be available.
The sustaining share of the WHC capital expenditure is high, the expansionary share is low.
A risk for WHC are shareholder resolutions against the business purpose of the company by green minded institutional investors betraying their clients. The last ones got 40% of the vote and thus might intimidate the management see below.
A challenge for coal company`s is “Banks and insurers denying service to businesses directly and indirectly involved in the coal and the gas sectors is an unacceptable risk to an industry that helps fund the way of life many of us take for granted (16). Coal is underinvested since years.
Production
WHC Coal Products
Maules Creek NSW produces high-CV thermal coal and semi-soft coking coal
Narrabri NSW produces high-CV thermal coal and PCI coal
Tarrawonga NSW produces high-CV thermal coal and semi-soft coking coal
Werris Creek NSW produces thermal coal and PCI coal (10)
Reserves 2022
There is a discepancy between the data from WHC and an article published in Australian Mining on Jan 11, 2023. According to that only the exploration licence not a production licence was given to WHC (11)
Growth Projects
WHC fiscal year is from July 1st - June 30th
Share Price 24.08.2023: 6.92 AUD/share about 4.7 USD.
Customers in 1000 AUD Comparison Revenue by geographic location
Most of the coal from WHC is sold to East Asian countries. The biggest growth potential is India.
Tax Situation:
Austrlian companies pay their dividends 100%
Australien verzichtet auf die Erhebung der Quellensteuer, sofern die Dividenden aus Gewinnen bezahlt werden, die bei der australischen Gesellschaft voll besteuert worden sind (franked dividends) oder es sich um die Ausschüttung von so genanntem „conduit foreign income“ handelt. Andere Dividenden werden weiterhin mit 30 % besteuert, wobei die Quellensteuer aufgrund des DBA, je nachdem, auf 15 %, 5 % oder 0 % herabgesetzt wird.
Some News
2023/09/02 The coking coal outlook for 2023 see (21)
2022/07/06 Green Lobby organizations - Bushfire Survivors for Climate Action – a client of the Environmental Defenders Office (EDO), a pro-bono law firm – has commenced judicial review proceedings in the NSW Land and Environment Court in respect of the matter (17).
2022/04/04 The Narrabi Extension project got the government approval. (15)
2022/02/14 NSW Department of Planning, Industry and Environment (DPIE) recommendation. After more than a year of review, the DPIE last month recommended that the Stage 3 Extension Project is in the public interest and approvable subject to conditions (14).
2021/10/12 Due to extreme low coal inventories in China China lifted the sanctions on Australian coal. (12)
2021/09/16 Whitehaven Vickery extension gets Federal nod
2021/04/15 ROM production guidance for the 2021 fiscal year fell from 21.4-22 million to 20.6-21.4 million tonnes. The updated unit cost guidance rose by 5 per cent from $69-72 to $73-75. (8)
2020/10/20 “In China, the arbitrage between domestic and import prices remain above $US25 ($35) per tonne, supporting the demand for imported coal and it is unclear if China will relax its custom clearance times and allow for further imports" (6). I assume that China limited imports to support its own coal industry.
2020/10/15 Whitehaven Coal has paused three key development projects, including the Narrabri and Vickery extension projects in New South Wales and the Winchester South metallurgical coal project in Queensland(6).
2020/10/12 China bans Australian coal imports as relations sour. China has suspended purchases of Australian coal. Chinese power stations and steel mills have been verbally told to immediately stop using Australian coal, and ports also have been told not to offload Australian coal, according to the report (5).
2020 05 The New South Wales Government has given Whitehaven Coal the all-clear to extend the Vickery coal mine in New South Wales (2).
Climate Related Shareholder Resolutions Sept. 03.2020
Someone would expect that investors holding shares of coal mines, oil companies believe in a modern future based on such energies. Someone who believe in acid rain, "climate change" or other green dogma will not buy or have such shares. In the 70ies green NGO bought a few shares of nuclear operators and forwarded petitions that were regularly very clearly rejected.
Today there is the phenomen that shareholders of energy companies forward shareholder petitions against the business purpose of the company in favor of the green dogma of "climate change". These petitions getting more and more and getting more and more votes.
I assume that these petitions and votes are usually supported by institutional investors. That means investor that invest other poeples money. The managers of these funds are proud of their green believe. Instead of living acc. to their dogma avoid motor vehicles, ac, heating, electricity, air travel, computers, they live their believe on the costs of their customers. Many of the final beneficiaries of pension funds don`t have a choice others most probably does not know what these managers are doing with their money. According to my opinion it is betrayal of the customers.
https://www.abc.net.au/news/2020-08-13/shareholder-fossil-fuel-resolution-whitehaven-coal/12546830
Basic Information
Rail haulage capacity Whitehaven has capacity within its two long-term rail haulage contracts for all current NSW based mine production plans (ARTC).
Port capacity Whitehaven exports coal through the Port of Newcastle using the two export terminal providers PWCS and NCIG.
Seaborne Coal Market
The global seaborne coal market has actually a size of about 950 M tons of thermal coal and about 230 M tons of met. coal. It is divided in the Atlantic and the Pacific market. The size of the Pacific market is x-fold that of the Atlantic market. The thermal coal market is expected to shrink to about 800 M tons of coal by 2035 while the market for met. coal is expected to increase.
Coal Quality Export Coal 2022
The WHC overall average energy content is about ~6100 kcal in CY22
Australia: Mostly coal 5600 - 6200 Kcal/Kg
Russia: Mostly coal 5600 - 6200 Kcal/Kg
Columbia, USA: Mostly coal 5600 - 6200 Kcal/Kg
South Africa: Mostly coal 5000 - 5600 Kcal/Kg
Indonesia: Mostly below 5000 Kcal/Kg
Some References
24. Sept. 19, 2023 https://www.australianmining.com.au/whitehaven-reveals-interest-in-key-bhp-coal-mines/
23. May 24, 2023 https://www.australianresourcesandinvestment.com.au/2023/05/23/coal-demand-peaking-but-difficulties-loom/
22. Feb. 22, 2023 https://www.australianmining.com.au/news/what-is-behind-bhps-decision-to-sell-australian-coal-assets/
21. Feb 09, 2023 https://www.australianresourcesandinvestment.com.au/2023/02/08/the-coking-coal-outlook-for-2023/
20. Feb. 08, 2023 https://www.australianmining.com.au/news/nsw-freezes-coal-royalties-in-a-welcome-reprieve/
19. Jan 11, 2023 https://www.australianmining.com.au/news/narrabri-coal-mine-life-could-extend-past-2050/
18. Nov. 11th, 2022 https://www.australianmining.com.au/news/coal-production-costs-have-doubled-over-six-year-span/
17. July 6th, 2022 https://www.australianmining.com.au/news/whitehaven-to-battle-narrabri-legal-challenge/
16. May 9th, 2022 https://www.australianmining.com.au/news/call-for-more-protection-for-coal-industry/
15. April 4th, 2022 https://www.australianmining.com.au/news/whitehaven-expands-narrabri-until-2044/
14. Feb. 14th, 2022 https://www.australianmining.com.au/news/whitehaven-narrabri-mine-extension-nears/
12. Oct. 12th, 2021 https://www.australianmining.com.au/news/china-forced-to-ease-coal-power-restrictions/
11. Sept. 16, 2021 https://www.australianmining.com.au/news/whitehavens-vickery-extension-gets-federal-nod/
10. August 29th, 2021 Sarah McNally
Investor Relations
Whitehaven Coal Limited
Level 28, 259 George St, Sydney NSW 2000 Australia
Tel: +61 2 8222 1155 Mobile: +61 477 999 238
Email: SMcNally@whitehavencoal.com.au www.whitehavencoal.com.au
9. August 5, 2021 https://www.australianmining.com.au/news/winchester-south-on-track-for-whitehaven/
8. April 15, 2021 https://www.australianmining.com.au/news/whitehaven-set-back-in-the-pack-for-2021/
7. Oct. 20, 2020 https://www.australianmining.com.au/news/yancoal-scales-back-spending-to-weather-unpredictable-coal-storm/
6, Oct. 15, 20https://www.australianmining.com.au/news/yancoal-scales-back-spending-to-weather-unpredictable-coal-storm/20 https://www.australianmining.com.au/news/whitehaven-to-delay-key-projects-amid-coal-slump/
4. Aug. 3rd, 2020 http://marketbeat.com/URL/?URL=https://www.afr.com/companies/mining/glencore-to-cut-australian-coal-production-20200802-p55hot
3. July 14, 2020 https://www.australianmining.com.au/news/whitehaven-optimises-nsw-operations-amid-global-slowdown/
2. May 21st 2020 https://www.australianmining.com.au/news/whitehaven-clears-vickery-expansion-hurdle/
1. April 2nd 2020 http://marketbeat.com/URL/?URL=https://steelguru.com/coal/glencore-and-tohoku-settle-thermal-coal-price/557765