Whitehaven Coal has recorded one of the best performances this year for a coal miner, smashing debt in three months and reaching output highs, but analysts warn weak coal prices may hurt growth.
During its annual general meeting on Wednesday, Whitehaven Coal said it had reduced net debt by 80 per cent since the end of the financial year.
At the end of June 30, 2017, the coal miner reported a net debt level of $311 million, which was a reduction of nearly 60 per cent from its net debt levels of $839 million in 2016. It has further paid down the $311 million to $65 million net debt in the three months since it released its full-year results.
Of this figure, its senior secured drawdown facility accounted for $50 million, with the remainder made up of its leasing facility.
It also reported a 20-fold increase in revenues year-on-year to more than $400 million, and has seen the company’s stock increase 21.40 per cent since the start of the year.
The miner said it would continue with the expansion of its mines, in particular Maules Creek.
‘‘Maules Creek can go bigger, extra tonnes within its existing footprint is possible,’’ Whitehaven chief executive Paul Flynn said.
Whitehaven also announced plans to expand its Narrabri NSW operations by up to a third, expanding north and potentially south pending exploration.
This is on top of plans for its proposed Vickery project in NSW, which has a total resource of 505 million tonnes of coal. Whitehaven plans to implement an ultra-class fleet of some of the largest mining vehicles in the country to service the mine.
Mr Flynn stated that this increase in production will include both thermal and coking coal. Despite the strong results, analysts are mixed on the company’s future.
Morgan Stanley analysts downgraded the miner last month, saying thermal coal prices were almost at 10- year lows but despite this, ‘‘we see little reason to hope for better prices’’.
‘‘We maintain a negative outlook for [Whitehaven Coal] due to its ties to the export market which we view as in structural decline.’’
One shareholder at the AGM said despite the stellar results, Whitehaven was unlikely to exceed its current levels. ‘‘It probably doesn’t get any better than this,’’ the shareholder said. ‘‘I’d be amazed if the same volume of coal produces the same results next year,’’ Data from the Department of Industry, Innovation and Science has tipped a decline in both the thermal and metallurgical coal spot price.
Thermal coal is forecast to fall to $US69 per tonne in 2019. This is well below the $US84 per tonne average expected for the remainder of 2017.
However, other analysts point to the miner’s increasing volumes ahead due to its planned expansions, and its high calorific, low ash coal, which is in demand in Japan and Taiwan, which are key markets for Whitehaven.
Metallurgical coal is predicted to fall sharply to $US140.7 per tonne in 2018, slipping even further to
$US119 per tonne in 2019.
This higher grade coal may Whitehaven it as demand for lower grade, cheaper, but higher ash content, coal declines.
Whitehaven’s share price closed at $3.65. on Wednesday