Cashed-up Whitehaven eyes BHP Queensland coal assets
Whitehaven managing director Paul Flynn said the miner was ‘having a look around’ after revealing strong revenues on the back of record average coal prices.
Whitehaven Coal shares rose after a rebound in its coal production combined with a record average coal price gave the miner a $2.65bn cash war chest for potential acquisitions and further shareholder returns.
Whitehaven was among the best performers on the S&P/ASX200 index on Monday on news its operations generated $435m in cash in the June quarter and $4.2bn for the 2023 fiscal year, despite softening coal prices.
Its shares closed up 2.7 per cent, or 18c, at $6.83.
The company now has $2.65bn in cash as it considers buying BHP’s Daunia and Blackwater coal mines in central Queensland.
Whitehaven managing director Paul Flynn said the miner was “having a look around”, with BHP’s Daunia asset of interest given it is located adjacent to Whitehaven’s Winchester South metallurgical coal project.
“We look at all assets that fit in the strategic crosshairs of the business,” he told analysts on Monday. “Of course Daunia is proximate to our Winchester South so that’s obviously why we would want to have a look at that.”
Mr Flynn said Whitehaven would also consider further share buybacks and dividends after returning $1.6bn to shareholders in FY23.
“We are maintaining a resilient balance sheet, and with strong underlying demand for our high quality products, Whitehaven is well placed to continue to generate strong cash flows and deliver value for our shareholders,” he said.
Whitehaven achieved a record average price of $445 a tonne for its coal in FY23, compared to the previous high of $325 in FY22.
Its annual production and sales volumes were affected by flooding and weather delays, labour shortages and operational constraints at its Maules Creek mine. Mr Flynn said a stronger June quarter compared to the March period helped Whitehaven meet its overall annual production and sales guidance. Its annual run-of-mine coal production was 18.2 million tonnes, the lower end of the 18.0-19.2 million tonnes guidance.
Whitehaven’s $1bn revolving finance facility was not renewed, amid campaigning by green groups for the big banks to stop funding its coal expansion.
Whitehaven said it completed its refinancing with a range of banks, and will retain cash on its balance sheet for operating the business, including for working capital.
“There’s no doubt that some of the banks have chosen to not participate in the refinancing as we go forward,” Mr Flynn said.
“Thermal coal has been less appealing from the banks’ perspective in terms of how they want to decarbonise their lending portfolios.”
Whitehaven chief financial officer Kevin Ball said lenders looked at the company’s cash position when deciding not to participate, but added that it was becoming increasingly difficult for thermal coal producers to attract external funding.
“I think anybody who’s in thermal coal is going to be facing similar challenges in organising funding from traditional sources,” he said.
Activist shareholder Market Forces’ acting CEO Will van de Pol said Whitehaven was being forced to finance its operations with cash that could otherwise be handed back to shareholders.
