Coal miner New Hope slumped to a $55.4 million first-half loss – reversing the $69.8 million profit from a year ago – thanks to the COVID-related coal price fall and drop in 2020 production output at its major mines.
The miner has, however, resumed its dividend payments and will pay a 4-cent interim, down from the 6 cents a share a year ago, expressing optimism about the outlook with a recovery in thermal coal prices.
It is a payment that will be welcomed by the company’s controlling shareholder, Washington H Soul Pattinson (which reports its latest results on Thursday).
New Hope said revenue for the six-month period to the end of January fell 34.4% to $405.5 million after coal sales dropped by 1.4 million tonnes to 4.9 million tonnes.
Realised pricing for the period in Australian dollars fell by $A19 per tonne to $A78.8 per tonne and world prices for thermal coal dropped to around $US50 a tonne in the depths of the lockdowns in mid 2020.
It has since recovered sharply to around $US98 a tonne (ex-Newcastle).
New Hope said its sales drop was driven by the mid-life dragline shut at the company’s Bengalla Mine in the upper hunter Valley of NSW, and a wind down at the New Acland Mine in Queensland as it awaits approvals for the project’s expansion.
The New Acland Mine will continue to see output fall, with production volumes set to decline for the remainder of the 2021 financial year. The company explained that production would fall because they would be constrained to mining remnant coal from Stage 2 operations in the absence of receiving Stage 3 approvals.
“The company remains focused on securing all necessary approvals for NAC03, however a period of discontinuity is likely, as last coal at the mine draws near,” New Hope told the market on Tuesday.
With the High Court of Australia ordering New Acland back to the Land Court of Queensland in the first quarter of FY22, and the prospect of the project being placed in care and maintenance, a further impairment of the asset has been accounted for in the half year results,” New Hope said.
That was a charge of more than $40 million. There was also a loss on the write-down of “onerous contracts” by more than $37 million. Those write downs added to the pressures on the bottom line from the fall in sales and earnings.
The third stage was delayed by the High Court ordering the approval process back to a lower court for a new examination.
New Hope said it commences the second half of the 2021 financial year with strengthening coal prices and improved underlying profit.
“Bengalla continues to perform strongly for the business and, although production was down slightly in the first half due to the major dragline shut, it was above expectations. The investment in the dragline has delivered continued improvement in productivity to ensure a strong performance into the future.”
The company said it had $215 million of available cash at the end of January.
In a separate statement to the ASX, New Hope revealed problems with the performance of several former executives.
New Hope stated in the release that directors of two former subsidiaries, now in liquidation, could be pursued for insolvent trading, asset transfers, and breaches of directors’ duties.
Colton Coal and Northern Energy Corporation (NEC) were put into liquidation in mid-2019 and New Hope has previously advised that liquidators were investigating “whether potential claims exist against the Company or former directors and officers of NEC and Colton”.
Last week, creditors agreed to fund liquidators KordaMentha to pursue the former directors.
The list of executives includes New Hope’s former chief financial officer, Matthew Busch, New Hope’s former CEO, Shane Stephan, former chief operating officer, Andrew Boyd, as well as Samuel Fisher and Stephen Eames.
Shane Stephan retired from New Hope back in August 2020, a departure announced in May last year, without any sign of concerns about his activities or those of the other executives named yesterday.
“There are press reports today,” New Hope said yesterday, “that the Liquidators of NEC and Colton intend to commence proceedings against the company and certain former directors and officers of NEC and Colton in connection with alleged voidable transaction, insolvent trading, asset transfers and breaches of directors’ duties in respect of claims the Liquidators estimate to be valued at $174.1 million plus interest and costs”.
The proceedings are expected to be finalised and filed within 10 days, according to New Hope.
New Hope drew attention to failed attempts by the liquidators and Wiggins Island Coal Export Terminal to make New Hope liable for New Hope and Colton’s debts. That action failed despite going as far as the High Court.
New Hope shares edged up 1.5% to $1.35.
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An unrelated filing with the ASX from another major NSW coal exporter reveals further problems for New Hope and its Bengalla mine and for other Hunter Valley miners (and those nearby).
These include Glencore and BHP.
Whitehaven Coal has trimmed production and sales forecasts by around half a million tonnes after the suspension of shiploading at the Port of Newcastle due to repairs and the threat of road and rail disruptions due to the heavy rainfall since late last week.
The cost in lost revenue could be upwards of $40 to $50 million dollars.
The company told the ASX that Newcastle Coal Infrastructure Group (NCIG) will not have any shiploading capability for two weeks while it completes repairs on its remaining shiploader.
NCIG’s other shiploader was damaged by storms in November last year and is also out of action.
Whitehaven has been redirecting ships to nearby Port Waratah Coal Services where possible since November. Newcastle sits at the mouth of the Hunter River, which is severely flooded which is making for difficult loading conditions.
The company said current weather-related port restrictions are also hampering vessel movements at the Port of Newcastle.
“A much wetter than average season has been experienced at site and the NSW State Emergency Service released a warning yesterday that flooding is predicted in the Namoi River, in the Gunnedah Basin, in the coming days,” Whitehaven told the ASX.
“While Whitehaven does not expect flooding at any of its operations, there is an elevated possibility of temporary inundation of local roads which could disrupt workforce movements and product haulage.
“Significant flooding has been seen elsewhere, with the Australian Rail Track Corporation advising that the Hunter Valley rail network is experiencing interruptions due to localised flooding which is expected to subside later this week,” Whitehaven said.
The company now expects managed production for the 2021 financial year of between 21.4 and 22.0 million tonnes, down from a range of 21 to 22.5 million tonnes
Managed sales are now expected to be between 18.5 and 19 million tonnes, down from 19 to 20 million tonnes.
Whitehaven shares fell 1.1% to $1.745.
