Whitehaven returns to profit in strong turnaround

JOHANNESBURG (miningweekly.com) – Australian coal miner Whitehaven is positive about the medium- and long-term outlook for coal, particularly high-quality coal, MD and CEO Paul Flynn said on Thursday, as he reported on the company’s 2016 financial year-end results.

The ASX-listed coal miner, which owns mines in New South Wales’ Gunnedah basin, reported net profit after tax of $20.5-million for the year ended June 30, which is a strong turnaround from the prior year loss of $342.7-million after significant items.

Sales revenue increased by 53% year-on-year to $1.16-billion, operating earnings before interest, taxes, depreciation and amortisation rose by 72% year-on-year to $224.1-million, while cash generated from operations increased by 76% year-on-year to $269.3-million.

“Our successful introduction of further cost reductions means our business model can operate profitably at lower price levels and that the business is resilient to cyclical pressure on price and demand,” Flynn said.

Whitehaven has reduced its unit costs to an average of $56/t for the year, down 8% from $61/t in 2015.

The return to profit was driven by the benefits of significantly increased production and sales volumes. Run-of-mine (RoM) production increased by 29% to a record 15.8-million tonnes and sales volumes increased by 43% to 15.5-million tonnes.

Whitehaven’s newest mine, Maules Creek, where commercial production was declared on July 1, 2015, was the largest producer with RoM output of 7.8-million tonnes. The start of commercial production at Maules Creek also helped to lower unit costs, as the mine operates at a lower cost than the portfolio average, owing to a consistent low strip ratio over the life of the mine. The mine sold 7.4-million tonnes in the year.

The Narrabri mine delivered RoM production of 6.9-million tonnes, which was an 11% decrease on the previous year, owing to two full longwall changeouts during the year, equating to the loss of about 12 weeks of production. Sales volumes, however, increased by 7% to 7.5-million tonnes.

Whitehaven said Narrabri’s record saleable coal output of 7.3-million tonnes in the year maintained the mine’s status as one of the most productive and lowest cost mines in Australia. The group said it expected production to increase in the 2017 financial year, as only one longwall changeout was required.

The Gunnedah opencut mines – Tarrawonga, Rocglen and Werris Creek – performed strongly and delivered a 5% increase in RoM production to 5.8-million tonnes. Sales volumes decreased by 1% to 5.1-million tonnes.

The company has set a production guidance of between 21-million tonnes and 22-million tonnes for the 2017 financial year.

In its commentary regarding coal markets, Whitehaven stated that coal “appears to have found a bottom” in the first quarter of the 2016 calendar year. The Newcastle GlobalCoal Index coal price has increased from a low of $48/t in early January to $67/t in August, while metallurgical coal prices have also increased.