Whitehaven Coal (WHC) boosted production at the right time as world prices for coking and steaming coal surged to levels not seen for five years.
The company told the ASX in its September quarterly report yesterday that output rose 20% in the quarter.
And the company expects the rebound in world coal prices to keep prices solid remain strong through the December quarter following recent settlements in Asian markets for coking and steaming (thermal) coal.
The market price for so-called ‘semi-soft’ coking coal, has jumped 86% to $US130 a tonne, it said in its latest quarterly report.
The rise follows the surge in the price being paid for premium coking coal of $US200 a tonne following recent contract settlements.
In the September quarter, Whitehaven received $US70 a tonne for sales of semi-soft coking coal and $US67 a tonne for sales of steaming coal.
Coking coal is used for making steel, with steaming coal mostly used in electricity generation and the cement industry.
Whitehaven said it produced 5.16 million tonnes of saleable coal during the September quarter, up from 4.31 million tonnes a year ago, due mainly to its 75% owned Maules Creek mine coming on line and increased production from the Narrabri mine.
Coal sales for the quarter rose 12% from a year ago to 5.03 million tonnes.
"As is usual in any period in which coal prices rise sharply, most producers will lag the rising spot price as sales comprise a mix of various contracted pricing periods and price linkages,“ Whitehaven said yesterday in pointing to investors to more price rises and higher income to come.
"While underlying demand has been strong, the recent higher pricing has been accelerated by the implementation of the Chinese Government policy supply side reform targeting the closure of some high cost, inefficient and environmentally lower quality production capacity from Chinese supply. "In addition, supply cuts by both swing seaborne metallurgical and thermal coal producers, weather related production issues in a number of countries and infrastructure constraints in Australia and Columbia have placed further pressure on coal supply.
Whitehaven expects pricing for metallurgical coal products in the December quarter to be significantly higher than September quarter. December quarter settlements for the three main metallurgical coal types have completed.
Low volatile PCI (Pulverised Coal for injecting into steel blast furnaces) coal settled at US$133/t, an increase of US$58/t or 77% and hard coking coal settled at US$200/t, up 116% on the prior quarter and semi soft coking coal settled at US$130/t up about 86% on the September quarter. Thermal coal prices are expected to be well supported over the remainder of FY2017.
Whitehaven’s share price rose 5% last week, continuing its steady climb thanks to renewed optimism over the outlook for coal prices, even though some analysts were warning late last week the rally was becoming overheated.
Whitehaven’s share price rose 3% yesterday to $2.96 yesterday. The shares have risen more than 300% in 2016 so far.
