Monsters of Rock: New Hope defies coal weakness with tasty payout

New Hope results impress investors with solid payout despite falling prices in the thermal coal market; Winsome releases lithium study.

Josh Chiat

3 min read

September 17, 2024 - 4:42PM

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Smells like money ... and burning. Pic: Getty Images

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New Hope delivers solid result despite lower coal prices
Winsome posts Adina lithium scoping study
Materials sector lifts, barely, as Fortescue puts the sector on its boulder shoulders

New Hope Corp (ASX:NHC) carved 8c off its final dividend for FY24, but still presented a picture of health in spite of a mild thermal coal market.

The Soul Patts backed coal miner, owner of the low cost Bengalla mine in New South Wales' Hunter Valley, saw an almost $1 billion drop in cash flow from $1.524bn in 2023 to $562m in 2024.

NPAT and underlying EBITDA roughly halved, falling from $1.087bn and $1.747bn respectively to to $475.9m and $859.9m.

But higher output, with stronger production at Bengalla and the restart of New Acland in Queensland lifting saleable coal 26.4% to 9.1Mt, ameliorated the impact of lower prices.

Saleable coal production is forecast to keep lifting to 14Mt and above by FY28, as New Hope ramps up New Acland and its minority owned Maxwell mine develops, a potential M&A target for NHC with the ASX-listed company holding almost 20% of the private owner Malabar Resources.

The met coal mine will sell 6Mtpa of met coal annually over 20 years.

A 22c final dividend – 1c higher than 2023 but with no special payout this year (9c in 2023) – saw total shareholder returns including divvies and buybacks of 47cps, down from 96cps in 2023.

Little surprise given realised prices for NHC came in at $195/t, down 43% YoY, with the low costs at Bengalla protecting margins though they still fell 62% to $89/t.

EBITDA, while halved, was still the third best result in New Hope's history.

"This year, we’ve delivered on our organic growth pipeline, with the realisation of productivity benefits from the Bengalla Mine Growth Project and the restart of operations at New Acland Mine resulting in a significant increase in coal production," New Hope CEO Rob Bishop said.

“The combination of a robust thermal coal price environment, disciplined cost control and strong operational performance contributed to the third highest earnings result in the history of our Company.

“Looking ahead, we remain focused on the organic growth of our business via the ramp-up of New Acland Mine, sustained increased production at Bengalla, and the development of Malabar’s Maxwell Underground Mine, all of which are low-unit cost assets."

Winsome, you lose some

Arguably the next most advanced stock in Canada's James Bay lithium district after Ken Brinsden's Patriot Battery Metals (ASX:PMT), Winsome Resources (ASX:WR1) delivered a landmark scoping study on its Adina project today.

While its resource at 77.9Mt at 1.15% Li2O doesn't have the scale or grade of Patriot's monstrous Shaakichiuwaanaan, Winsome may have a leg up when it comes to infrastructure.

Its plan is to repurpose the Renard diamond mine concentrator in a big to clip capital costs.

Utilising a 5.5% Li2O spodumene price of US$1375/t (currently prices are at a bargain basement US$760/t on a 6% basis), WR1 thinks it will cost US$259m (~$380m Aussie) to deliver a project churning out 282,000t of 5.5% Li2O concentrate at all in sustaining costs of US$693/t over 17 years.

Another four years of stockpile processing could take its life beyond two decades.

The project boasts a post-tax NPV8 of US$743m (A$1.1bn) and IRR of 43% with a 1.8 year payback. Of course, market pricing will make a big difference to whether this can get off the ground.

Patriot previously stuck a US$487m pricetag on developing its Shaakichiuwaanaan project, though at 24 years and 400,000tpa it is a much larger operation.

Winsome was down 1.9% today despite MD Chris Evans saying the study demonstrated the use of the Renard plant offered a "significant commercial advantage that will see the facility operate through market fluctuations and commodity cycles."

"The ease of mining mineralised material at Adina via an initial low strip open pit along with the simple DMS flowsheet results in a competitive operating cost estimate which optimisation may improve further.

“Winsome has a clear pathway to production outlined by the Scoping Study, underpinned by well-planned strategic initiatives like the exclusive option to acquire Renard.

"Given the global challenges facing the market, we believe our approach, combined with our world-class Adina asset, is positioning the Company for long-term returns to shareholders, stakeholders and importantly First Nations in the Eeyou Istchee James Bay region and the Province of Québec.”

Materials stocks closed the day 0.05% higher, with much of the win attributable to a 1.75% gain from Andrew Forrest's Fortescue (ASX:FMG), while energy stocks gained 0.2%.