Whitehaven Coal shares fall as it puts off Vickery mine decision
Shares in Whitehaven Coal took a 10pc hit after the company put off an investment decision on its $700m Vickery mine in NSW.
Shares in Whitehaven Coal took a 10 per cent hit on Thursday after the company downgraded sales expectations and pushed back an investment decision on its $700m Vickery coal mine in NSW, citing volatile market conditions.
Whitehaven sliced another 1.5 million tonnes from its financial year sales expectations citing timing issues, downgrading managed coal sales forecasts to 17.5-18.5 million tonnes.
The company did not shift its output forecasts, but will need a strong performance at its operations to meet full-year guidance, after struggling in the March quarter.
It also pushed back expectations for its Vickery mine, saying conditions had made it wary of committing to capital spending in a volatile coal market.
Whitehaven had hoped to begin construction of the 10 million tonne a year mine by the end of 2020, but said it wouldn’t make a call on any of its growth projects — including Vickery, the Winchester South metallurgical coal project or an expansion of its Narrarbi underground operations — until at least 2021.
At its annual shareholder meeting in October, managing director Paul Flynn told shareholders the company expected to make a call on the $700m Vickery mine by the end of June, with construction to begin by December and first coal into the market in 2022. That timetable was dependent on the NSW government’s Independent Planning Commision giving Vickery the go-ahead by the end of March, a process delayed first by a review of the commission’s role in the state and then by the impact of the coronavirus, which has complicated the process of conducting public consultations on Whitehaven’s proposal.
Whitehaven said on Thursday that turmoil on global markets, and uncertainty around the outlook for coal, could lead to further delays, with no decision now expected on the $700m mine until at least next year.
“While coal markets in the March quarter have demonstrated their resilience, volatile financial market conditions cause Whitehaven to continue to be cautious in allocating capital to expansion. Whitehaven does not expect to consider making a Final Investment Decision in relation to these projects in 2021,” it said.
The comments come as Whitehaven released its March quarter production figures, which showed a sharp drop off in coal sales for the period as the company worked its way through the impact of raging bushfires in NSW, a labour shortage impacting its key Maules Creek operations and the impact of the coronavirus.
Coal sales managed by Whitehaven, including product it bought and then sold on, fell 22 per cent from the March 2019 period, to 4.5 million tonnes.
Its mines produced 4.1 million tonnes of saleable coal for the period, 15 per cent below the same time last year, after an unscheduled outage at its Narrabri underground operations in March cost it 20 days of production.
Run of mine production was 4.9 millio tonnes, up slightly over the year. But its operations have so far produced only 12.4 million tonnes of coal, meaning the company needs a heroic effort in the final quarter of the year to meet even the bottom end of its 20-22 million tonnes mine production guidance.
Pricing for the period was slightly better than the December quarter, with Whitehaven’s thermal coal fetching an average $US68 a tonne, slightly up on the $US66 in the December period.
Whitehaven shares closed down 20.5c to $1.855 on Thursday.