The La Niña-linked heavy rain and flooding around Gunnedah in NSW has seen Whitehaven Coal, the largest listed coal exporter, forced to cut production and sales guidance for a second year in a row.
Flooding earlier this year saw the miner trim its June 30 guidance for thermal and soft coking coal production and sales and it confirmed yesterday a cut to the 2022-23 guidance.
The news saw the shares slide more than 9% as the boom continues to go out of the export coal sector, helped by sliding prices of thermal coal in Asian markets in particular, on top of the wet weather in NSW in the past couple of months.
Whitehaven shares ended the day at $8.61, down more than 8% and well under the $10.89 it hit in early October in the wake of the bullish September quarter production, sales and price report from the company.
That report did highlight the weaker production in the quarter because of the wet weather and yesterday’s statement confirmed the longer-term impact.
In yesterday’s statement to the ASX Whitehaven said that regional and localised flooding impacts arising from the continuing La Niña phenomenon have hampered production at its open cut mine operations in NSW.
“As announced in the September Quarterly Production Report, Run of Mine (ROM) production was lower than planned across all three open cut mines primarily as a result of disruption caused by rain and flooding impacts in September.
“As referenced at the Company’s Annual General Meeting in October, access roads and haulage roads continued to be impacted. Wet weather has persisted into November with soil moisture profiles, dams and river systems at capacity in the Gunnedah Basin.
“Whitehaven has not experienced on-site flooding and has maintained a level of production continuity by transporting people to sites via helicopter to overcome flood-related access issues.
“While mine sequencing plans provide opportunities to lift volumes throughout the year, recent rain and flooding events continue to drag on ROM production, predominantly at Maules Creek and Tarrawonga open cut mines.
“Whitehaven has moderated its expectation for FY23 ROM coal production from its open cut mines given current and possible projected impacts of weather and ongoing labour constraints.”
Whitehaven signalled a small positive with an upgrade of its guidance for Narrabri following stronger than anticipated performance at that mine.
The main changes to guidance are:
- Managed ROM [run-of-mine] production down to the range of 19-20.4 million tonnes for the year to next June, from guidance of 20 to 22 million tonnes;
- Managed coal sales down to 16.5-18 million tonnes from 17.5 million to 18.5 million tonnes; and
- Equity coal sales down to 13.1-14.4 million tonnes from 14.1 to 14.9 million tonnes.
The new estimates mean little change from 2021-22’s performance when ROM coal was 20 million tonnes, managed sales 17.6 million and equity sales 14.2 million tonnes/.
With lower production and sales unit costs have risen to $95 to $102 a tonne from the previous forecast of $89 – 96 a tonne. That is up from $84 a tonne for 2021-22.
At the same time downward price pressures are slowly emerging for Whitehaven and other thermal coal exporters.
The Newcastle thermal coal index is showing a dramatic slide in prices for high grade steaming coal (like that produced by Whitehaven, Peabody, Glencore, BHP, Yancoal and others).
The December contract fell to $US323.50 a tonne on Tuesday, down 3.5% on the day and more than $US120 a tonne since its most recent peak of $US444 a tonne in late September.
Weaker gas (LNG) prices have helped drag the price lower and futures prices for 2023 have also slumped by around the same amount, pointing to lower prices in the third and 4th quarters of the current financial year.
Prices this half are higher than a year ago, but the current weakness will start emerging in six months’ time.
